Overview

Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses ("Corporate Tax Law") was issued on 3 October 2022 and was published in Issue #737 of the Official Gazette of the United Arab Emirates ("UAE") on 10 October 2022.

The Corporate Tax Law provides the legislative basis for imposing a federal tax on corporations and Business profits ("Corporate Tax") in the UAE.

The provisions of the Corporate Tax Law shall apply to Tax Periods commencing on or after 1 June 2023.

Purpose of this guide

This guide is designed to provide general guidance on registration of natural persons in the UAE for Corporate Tax purposes. It provides readers with an overview in relation to Corporate Tax, of:

• The Tax Registration rules for a natural person;

• How a natural person can determine whether they need to register for Corporate Tax; and

• The Tax Deregistration process.

Who should read this guide?

This guide should be read by any natural person that is conducting a Business or Business Activity in the UAE, to help them understand whether they need to register for Corporate Tax. It is intended to be read in conjunction with the Corporate Tax Law, the implementing decisions and other relevant guidance published by the FTA.

How to use this guide

The relevant articles of the Corporate Tax Law and the implementing decisions are indicated in each section of the guide.

It is recommended that the guide is read in its entirety to provide a complete understanding of the definitions and interactions of the different rules. Further guidance on some of the areas covered in this guide can be found in other topic- specific guides.

In some instances, simple examples are used to illustrate how key elements of the Corporate Tax Law apply to natural persons. The examples in the guide:

• Show how these elements operate in isolation and do not show the interactions with other provisions of the Corporate Tax Law that may occur. They do not, and are not intended to, cover the full facts of the hypothetical scenarios used nor all aspects of the Corporate Tax regime, and should not be relied upon for legal or tax advice purposes; and

• Are only meant for providing the readers with general information on the subject matter of this guide. They are exclusively intended to explain the rules related to the subject matter of this guide and do not relate at all to the tax or legal position of any specific juridical or natural persons.

Legislative references

In this guide, the following legislation will be referred to as follows:

• Federal Decree-Law No. 28 of 2022 on Tax Procedures is referred to as "Tax Procedures Law";

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, and its amendments, is referred to as "Corporate Tax Law";

• Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law is referred to as "Commercial Transactions Law";

• Cabinet Decision No. 49 of 2023 on Specifying the Categories of Businesses or Business Activities Conducted by a Resident or Non-Resident Natural Person that are Subject to Corporate Tax is referred to as "Cabinet Decision No. 49 of 2023";

• Cabinet Decision No. 74 of 2023 on the Executive Regulation of Federal Decree- Law No. 28 of 2022 on Tax Procedures is referred to as "Cabinet Decision No. 74 of 2023";

• Ministerial Decision No. 73 of 2023 on Small Business Relief for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is referred to as "Ministerial Decision No. 73 of 2023";

• Ministerial Decision No. 114 of 2023 on the Accounting Standards and Methods for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is referred to as "Ministerial Decision No. 114 of 2023"; and

• Federal Tax Authority Decision No. 6 of 2023 on Tax Deregistration Timeline for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is referred to as "FTA Decision No. 6 of 2023".

Status of this guide

This guidance is not a legally binding statement, but is intended to provide assistance in understanding the provisions relating to Tax Registration for Corporate Tax for natural persons. The information provided in this guide should not be interpreted as legal or tax advice. It is not meant to be comprehensive and does not provide a definitive answer in every case. It is based on the legislation as it stood when the guide was published. Each Person's own specific circumstances should be considered.

The Corporate Tax Law, the implementing decisions and the guidance materials referred to in this document will set out the principles and rules that govern the application of Corporate Tax. Nothing in this publication modifies or is intended to modify the requirements of any legislation.

This document is subject to change without notice.

Who is a Taxable Person?

A Taxable Person could either be a natural person or a juridical person. Most Taxable Persons will be required to register for Corporate Tax purposes, with the exception of Non-Resident Persons that derive only State Sourced Income without having a Permanent Establishment in the UAE.

The circumstances under which a natural person will be treated as a Taxable Person who is required to register for Corporate Tax are set out below.

Who is a natural person?

The term natural person takes its ordinary meaning, and refers to a living human person of any age, whether resident in the UAE or elsewhere. A natural person would only be subject to Corporate Tax insofar as he/she conducts a Business or Business Activity in the UAE. This includes sole establishments and individual partners in Unincorporated Partnerships that conduct a Business or Business Activity in the UAE.

A sole establishment is a trading Business owned by a natural person, where the proprietor is not separate from the Business. This is because of the direct relationship and control of the natural person(s) over the Business and his/her unlimited liability for the Business's debts and other obligations. In such circumstances, the natural person carries on the Business in his/her own name, as opposed to owning an interest in a separate legal entity which carries on the Business.

A natural person can be either a Resident Person or a Non-Resident Person. See Section 3.2.1 and 3.2.2 below.

For minors or incapacitated individuals, the natural person's Corporate Tax obligations shall be fulfilled by their Legal Representative. ^[1]

Calculation of Turnover

How to register

An application to register for Corporate Tax can be made on the EmaraTax portal. A natural person who is already registered for Value Added Tax or Excise Tax can use his/her existing login details. A natural person that has not previously registered with the FTA will be required to create new login credentials the first time he/she accesses the EmaraTax portal.

A step-by-step user guide on the Tax Registration process is available on the FTA website, and additional support can be accessed by contacting the FTA helpline on 80082923 during working hours.

The Tax Registration process

A natural person who is required to register for Corporate Tax must submit a registration application along with the relevant supporting documentation to the FTA. ^[14] The FTA will review each application and either approve or reject it. Once the application is approved, the FTA will issue the natural person with a Tax Registration Number.

Figure 1: Overview of the Tax Registration process

Key information and documentation requirements for Tax Registration purposes

The Tax Registration process has been designed to be simple and easy to complete for applicants. The information required to complete the registration application should be information that the applicant will already have, or is expected to have.

Applicants should ensure that they have the information and documentation specified in Table 1 available before starting the Tax Registration process.

Table 1: Overview of Tax Registration information and documentation requirements

Persons already registered for Value Added Tax and Excise Tax

A natural person who is already registered for Value Added Tax and/or Excise Tax will still be required to register for Corporate Tax if he/she is within the scope of the Corporate Tax regime. Once registered, he/she will be issued with a separate Tax Registration Number for Corporate Tax purposes. This Tax Registration Number will be similar to their existing Tax Registration Number for Value Added Tax and/or Excise Tax, but the last digit will be different from their Tax Registration Number(s) for Value Added Tax and/or Excise Tax.

Obligations once registered

Once a natural person has registered for Corporate Tax, he/she will be subject to a number of administrative Corporate Tax obligations. These include:

• Filing a Tax Return and paying any Corporate Tax due within 9 months of the end of their Tax Period; ^[15]

• Retaining all records and documents which support his/her tax position for a period of 7 years following the end of the Tax Period to which they relate; ^[16] and

• Ensuring that all of his/her registration details are up to date and informing the FTA of any changes within 20 business days, otherwise penalties may arise. ^[17]

FTA power to register a Person for Corporate Tax

If the FTA believes that a natural person is a Taxable Person and should have registered for Corporate Tax but has failed to do so, the FTA can, at its discretion and based on information available to the FTA, register that natural person for Corporate Tax, effective from the date they should have registered from. ^[18]

A natural person has the right to appeal against a tax assessment issued following a registration initiated by the FTA if they disagree with such a decision.

Cessation of Business or Business Activity

Generally, if a natural person is no longer subject to Corporate Tax, he/she should deregister. This will most commonly occur when his/her Business or Business Activity ceases. ^[19]

A natural person will only have one Tax Registration Number for Corporate Tax for all his/her Business and Business Activities. A natural person should only deregister for Corporate Tax if he/she has ceased conducting all Business or Business Activities. ^[20]

In case of cessation of his/her Business or Business Activity, a natural person or, in certain cases, his/her Legal Representative must make a Tax Deregistration application to the FTA. This application must be made within 3 months of the date of cessation of the Business or Business Activity. ^[21] The date of deregistration will be the date the Business or Business Activity ceased, unless the FTA determines otherwise. ^[22]

A natural person who is already registered for Corporate Tax with the FTA should not file a Tax Deregistration application if any of the natural person's Business or Business Activities are still active or being conducted, even if the natural person's total Turnover falls under the AED 1 million threshold within a Gregorian calendar year. Instead, he/she will retain his/her Tax Registration status. However, a natural person who remains registered whilst his/her total Turnover is under the AED 1 million threshold will only be required to file a 'nil' tax return.

The Tax Deregistration will not be approved if the natural person has not filed all the required Tax Returns and paid all due Corporate Tax and Administrative Penalties, including the Tax Return for the Tax Period up to and including the date of cessation. ^[23]

In the event that a natural person submitted an application for deregistration and then in the same Tax Period commenced a new Business or Business Activity following submission, the Tax Deregistration application would no longer be valid and the natural person would continue to be registered for Corporate Tax. ^[24]

Death of a natural person

When a natural person dies, he/she ceases to be a Taxable Person. The settlement of any outstanding Corporate Tax liabilities due from the natural person prior to the date of death, shall be made in accordance with the provisions of Article 42(1) of the Tax Procedures Law. These apply as follows:

• For Corporate Tax Payable due prior to the date of death, settlement shall be made from the value of the elements of the estate or income arising thereof prior to distribution among the heirs or legatees.

• If it transpires after the distribution of the estate that there is Corporate Tax Payable still outstanding, recourse shall be had against the heirs and legatees for settlement of such outstanding tax each to the extent of their share in the estate, unless a clearance certificate has been obtained from the FTA for the estate representative or any of the heirs.