Only taxable persons need to pay corporate tax in the UAE. It is first important to identify if your business qualifies as a taxable person as per the tax regulations in the UAE.

The ministry considers a person to include both -

1. Natural Person - In general, this includes individual(s) only. Do note if an individual sets up a sole establishment or a civil company, these companies will be disregarded and treated as the natural person or person owning them. The reasons for this is that the owner has unlimited liability and there is direct ownership and control.

2. Juridical Person - In general, this refers to a separate legal entity that is established under the laws of UAE or a foreign jurisdiction.

As per the decree, a taxable person can be either -

1. Resident Persons

2. Non-Resident Persons

In simple terms, the following are the types of resident persons -

a) Juridical persons incorporated in the UAE. This basically includes any companies or legal persons incorporated in the UAE, including Free Zone companies.

b) Juridical persons incorporated outside the UAE that are effectively managed and controlled in the state.

c) Natural persons conducting business or business activity in the UAE. This includes individuals, that have not incorporated a company formally, but still conduct business on an individual basis. The natural persons will only be taxed if they have business or business activity exceeding 1M AED in a calendar year.

d) Any other persons that the Ministry Of Finance suggests.

A Non-Resident Person is a person who is not considered a resident person and are either of the following-

a) Has permanent establishment in the state. This in general means if the non-resident person has either a fixed place or business in the UAE, or habitually conducts business or business activity in UAE, or has a form of nexus in the state.

b) Derives UAE Sourced Income. This includes income from a resident person, or a non resident person with permanent establishment in UAE, or assets located in UAE. We have discussed this in detail in a separate blog.

c) Has a nexus in UAE. In simple terms if a non resident person earns income from immovable property in UAE.