How UAE Corporate Tax Impacts Freelancers and Small Businesses

The UAE implemented a federal company tax to diversify its economy and conform to global standards. While many large organizations have already prepared, freelancers and small company owners are still working out what this means for them. In this article, we’ll look at how the UAE Corporate Tax affects freelancers and small businesses, the exemptions available, and the measures you need to take to be compliant.

Understanding UAE Corporate Tax Basics

In our previous article, we discussed the basics of UAE corporate tax, such as tax rates, applicability, and effective dates.👉What is the UAE Corporate Tax? A beginner’s guide https://blog.danabooks.com/uae-corporate-tax/. This easy-to-understand document explains how the 9% corporate tax applies to enterprises earning more than AED 375,000 each year.

In this blog, we will look specifically at how these tax changes affect freelancers and small enterprises operating in the UAE.

Who Does It Apply to?

If you’re a freelancer, solo entrepreneur, or running a small business, you may fall under the corporate tax regime.

• You earn a net profit of more than AED 375,000 every year.
• You have received a freelance or trade license from a UAE authority.
• Your business activities qualify as a commercial operation (as opposed to hobby or employment income).

Note: Salary and job income are not subject to corporate taxation.

Freelancers: What You Need to Know

Freelancers with commercial licenses are classified as ‘natural persons running a business.’ Here’s how taxes apply:

• If your net business income is less than AED 375,000: 0% tax.
• If it exceeds AED 375,000, the surplus will be taxed at 9%.

The scope excludes freelancers who work for a firm (for example, remote employees). Only self-employed persons with a business license must register and file taxes.

Small Businesses and Corporate Tax

Small firms are not exempt, although the UAE has implemented a Small Business Relief Scheme.

Key provisions:

• If your yearly revenue is less than AED 3 million, you might choose to be classified as having no taxable income.
• This relief is effective until December 31, 2026.
• You must apply for the relief when you file your tax return

This allows start-ups and micro-enterprises to avoid undue tax expenses in their early years.

Mandatory Corporate Tax Registration

Even if you fall below the threshold, you must register with the Federal Tax Authority (FTA). Failure to do so may result in sanctions.

Steps for registration:

• Sign up with EmaraTax.
• Upload your trade or freelancing license.
• Submit your financial information.
• Receive your Tax Registration Number (TRN).

Record-Keeping and Compliance

Freelancers and small enterprises must keep accurate records, including:

• Invoices
• Expense receipts
• Bank Statements
• Contracts

You must file a Corporate Tax Return each year, even if you qualify for 0% tax or Small Business Relief.

Common Mistakes to Avoid

• Ignoring registration because you are below AED 375,000
• Combining personal and business income
• Failure to file for Small Business Relief on time
• Not keeping accurate records

Should You Hire a Tax Consultant?

Hiring a tax advisor or accountant can help freelancers and small businesses comply with tax requirements, maximize deductions, and avoid fines.