Should freelancers pay corporate tax in the UAE?

Corporate Tax,Accounting,UAE VAT

Should freelancers pay corporate tax in the UAE?

Are you a freelancer in Dubai and are you worried about the new law enacted by the regulations of corporate tax in the UAE? You are in the right place. This article seeks to help you understand what corporate tax is, and if it will affect freelancers or not.

Freelancers Pay Corporate Tax in dubai

What is a corporate tax?

It is best to think of “Corporate Tax” as a type of direct tax imposed on the net income or profit of a corporation or other legal organization. 

The UAE business forerunners decided to implement corporate tax in every business to increase contributions of innovators and entrepreneurs. This new development is due to the fact that the country offers businesses unmatched access to state-of-the-art infrastructure, cutting-edge technology, and 100% foreign ownership because it is a pro-business hub. Which is why, numerous professionals travel to the UAE each year in quest of these benefits and exciting employment opportunities. Because of this, the UAE Ministry of Finance (MOF) announced Federal Decree-Law No. 47 of 2022, laying the groundwork for the corporation tax on business profits in the UAE. 

Given that this is the first time the government of the UAE has chosen to impose a corporation tax, it is crucial to determine and understand how it will affect freelancers in the future.

Who Will Pay The Corporate Tax?

On the mainland, even companies that operate in tax-free areas must file their corporate tax filings online. In addition to receiving benefits, free zones must register for corporation tax and submit it on a regular basis. 

Additionally, it applies to anybody who works in the UAE’s economy, industry, or profession. For instance, the income of those who work for themselves and earn money will be subject to corporation tax in the UAE. Non-UAE citizens and businesses that operate continuously or on a regular basis within the Emirates are also subject to taxation. 

Therefore, foreign subsidiaries operating in the UAE would be subject to corporation tax. 

Will Freelancers Pay Corporate Tax?

The UAE corporate tax will apply to all business and commercial activity in the country, with the exception of resource extraction. On December 9, 2022, the United Arab Emirates released a federal decree on corporation and business taxation, setting the groundwork for a 9% rate on taxable profits over AED 375,000 ($102,000). Since this level was established in accordance with the government’s policies to promote start-ups or small and medium-sized businesses, profits below AED 375,000 will be taxed at 0%.

Note: This federal decree was enacted on the 1st of June, 2023.

This simply means that, in the UAE, independent contractors who work for themselves and freelancers who earn more than AED 375,000 annually will also be subject to the Corporate Tax regime as long as they have a license or permit.

Are there any exemptions?

Those who have the new freelance permission, which is made available under the new labor law for self-sponsored expats, are exempt from paying corporate tax on their earnings. If independent contractors with business licenses are sponsored in a free zone and perform any work for other companies, the sponsor will be required to pay the corporate tax. 

Freelancers who are employed by a company are not subject to income tax on their earnings from salaries; rather, the company that issues the visa is, and will be taxed on its net profit.

Moreso, profits earned by individuals or independent contractors while acting in their capacity are excluded from corporate income tax in the following circumstances:

  • Interests, profits, and other gains derived from bank deposits or savings plans by a person residing in the UAE. 
  • Income earned by persons in their capacity from real estate assets. 
  • Dividends, capital gains, and other income earned by people who own shares or other securities.


Final Thoughts

The new corporation tax structure in the UAE will make the country’s economic environment more transparent and attractive to major innovators in the nation.

Licensed freelancers with an annual income (in profits) greater than AED 375,000 will have to pay the 9% corporate tax. While those who didn’t make up to this amount will pay a 0% fee. However, it can be stated that since freelancers don’t earn up to this amount, they don’t have to worry about corporation tax.

It can be difficult to navigate

corporate taxation requirements, but by being aware of your obligations with regard to corporate taxes, you can continue to abide by the tax laws of the UAE government. This is crucial as a freelancer in the UAE if you want to build a financially secure future for your company and seize all the opportunities that this dynamic nation has to offer.

Therefore, it will be a wise move to engage with accounting services in Dubai

to make your business journey seamless and productive whilst coaching you on the ropes of corporate tax as a freelancer in UAE.

RSN Consultancy Accounting & bookkeeping firm

As a business owner or entrepreneur, getting help from a business setup consultant can make your journey smooth and stress-free. Our consultants have years of experience in company formation and are here to offer tailored advice for setting up your business in Dubai and the UAE.

Contact us today to start your business journey with confidence and set yourself up for success from the very beginning!

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