As of June 2023, the UAE’s Corporate Tax (CT) introduced under Federal Decree-Law No. 47/2022, now includes freelancers, consultants, and sole establishments. as "natural persons" conducting business taxing profits at 0% up to AED 375,000 and 9% above, with registration mandatory if turnover exceeds AED 1 million annually. Even without formal companies, licensed freelancers in free zones (IFZA/GoFreelance) or mainland sole proprietors must track income to avoid AED 10,000+ FTA penalties.Simply put, if you’re self-employed or running a small business, you’re now part of this tax framework.
Who is Affected: Freelancers, Consultants, Sole Establishments & Self-Employed Professionals?
This law impacts a broad spectrum of professionals from designers and IT consultants to writers and other independent contractors("Natural persons). If you hold a trade license or a freelance permit and earn business income like consultancy fees, digital services, or product sales then these regulations apply to you.
Thresholds, Tax Rates & When You Must Register
Registration Trigger: Turnover >AED 1M (12 months rolling; natural person license) or AED 375K (business license sole prop). Register via EmaraTax by March 31 following tax period end (e.g., 2024 income by Mar 2025).
Tax-Free Threshold: 0% on first AED 375,000 taxable profit; 9% above (e.g., AED 500K profit = AED 11,250 tax on AED 125K).
Small Business Relief: Revenue <AED 3M qualifies for simplified filing (no audit for first 3 years). Track via bank statements/invoices; VAT (AED 375K separate) often overlaps.
| Scenario | Turnover Threshold | Tax on Profit >AED 375K |
|---|---|---|
| Natural Person Freelancer | AED 1M | 9% |
| Sole Establishment (License) | AED 375K | 9% |
| Exempt (Salary/Passive) | None | 0% |
How to Register, Report & Maintain Compliance?
FTA Registration: UAE Pass login on EmaraTax; submit license, passports, bank details (TRN issued 10-20 days).
Records: Income/expenses ledgers, invoices (even under threshold), 5-year retention.
Filing: Annual return by 9 months post-tax year (e.g., Dec 31, 2024 income by Sep 30, 2025); nil returns if no tax due. Bookkeeping essential: separate business accounts, QuickBooks exports for audits.
Staying Compliant
It’s essential to keep thorough records of income ledgers, invoices, and other documents for at least five years. This ensures you avoid penalties and stay on the right side of the law.
Tax Planning Tips
You can lower your taxable profit through legitimate deductions. For example, home office expenses can include a portion of your rent and utilities. Deductible items also cover equipment and software, like laptops or design licenses. Additionally, marketing costs, travel, and professional fees are deductible. Just remember, personal expenses, like groceries, aren’t eligible.
The goal is to keep your net profit below AED 375,000 to benefit from the 0% tax rate. Maintaining thorough records of your deductions is key, and most consultants can typically claim about 80-90% of their expenses.
Key Deadlines and Penalties
For income earned in 2024, make sure to register by March 31, 2025, and file your annual return by September 30, 2025. Missing deadlines can result in penalties, such as AED 10,000 for late registration or monthly fines for late filing.
| Violation | Penalty |
|---|---|
| Late Registration | AED 10K |
| Late Filing | AED 500/month |
| Incorrect Return | 1% tax due |
Conclusion
In summary, UAE Corporate Tax levels the playing field for freelancers and sole proprietors. By tracking your turnover carefully and making smart deductions, you can maximize your benefits and stay compliant. For additional support, professionals like Reyson Badger can help streamline the process, ensuring 100% compliance with clear guidance.
