UAE Corporate Tax for Freelancers and Sole Establishments: When It Applies to You.

Many people assume UAE Corporate Tax stops at companies. It does not. A natural person who runs a business in their own name, whether on a freelance permit or through a sole establishment licence, can be a taxable person too.

The good news is that the threshold is clear, and a lot of personal income sits outside it entirely. Here is how to tell where you stand.

The AED 1 million turnover test

Cabinet Decision No. 49 of 2023 sets the rule. A natural person's business activities are subject to Corporate Tax only where the total turnover from those activities exceeds AED 1,000,000 within a Gregorian calendar year.

Three details matter:

• Turnover, not profit. Turnover means the gross income for the year before any costs. A freelancer with AED 1,100,000 of fees and AED 600,000 of costs has still crossed the line.
• All your businesses together. Income from freelance work, a sole establishment and your share of an unincorporated partnership is added up. You do not test each one separately.
• The calendar year. For individuals, the tax period is 1 January to 31 December.

A sole establishment is not a separate taxpayer. For Corporate Tax, the owner and the business are one and the same, so the owner is the taxable person.

What is not business income

Three types of income are excluded from turnover and are not subject to Corporate Tax, whatever the amount:

• Wages. Salary, allowances and bonuses under an employment contract. The FTA guide adds that director fees are generally not treated as business income either.
• Personal investment income. Investing for your own account, such as buying listed shares with savings, provided the activity does not need a licence and is not a commercial business under the Commercial Transactions Law.
• Real estate investment income. Renting out or selling UAE property you own, provided it is not done through, and does not need, a licence.

The licence point is the dividing line. The same activity carried on under a trade licence is treated as business.

A worked example

"I work part time for a Dubai company on AED 240,000 a year. I also design brand identities on a freelance permit, and I rent out one apartment."

In 2026 her design fees are AED 900,000 and her rent is AED 150,000. Salary and rent are excluded, so her turnover is AED 900,000. She is under the threshold and does not need to register.

In 2027 her design fees rise to AED 1,300,000. Turnover now exceeds AED 1,000,000, so her freelance business is within Corporate Tax for 2027. With AED 300,000 of deductible costs, her taxable income is AED 1,000,000. Tax is 9% on the AED 625,000 above AED 375,000, which is AED 56,250.

Her revenue is under AED 3,000,000, so she may be able to elect Small Business Relief instead. If she qualifies and elects, she is treated as having no taxable income for the period. The Ministry of Finance extended the relief in August 2026 (Ministerial Decision No. 131) to tax periods ending on or before 31 December 2029.

Registration and returns

Under FTA Decision No. 3 of 2024, a resident natural person whose turnover passes the threshold must apply for registration by 31 March of the following calendar year. The return is due within nine months of the end of the tax period, so a 2027 return is due by 30 September 2028.

Once registered, a few rules often surprise people:

• One registration, one return. You file a single return covering all your businesses under one Tax Registration Number.
• No deregistering in a quiet year. If turnover later drops below AED 1,000,000, you stay registered and file a nil return. Deregistration applies only when all business activity stops, and the application is due within three months of stopping.

What records to keep

The Corporate Tax Law requires records that support your return to be kept for seven years after the end of the tax period. For a freelancer or sole owner, that means:

• Sales invoices and contracts for every client, UAE and overseas.
• Expense invoices and receipts for every cost you deduct.
• Business bank statements, ideally from an account used only for the business.
• Evidence for excluded income. Employment contracts and payslips, tenancy contracts and property title deeds, and brokerage statements, so you can show why they sit outside turnover.
• Financial statements for the business. The FTA guide says individuals can use IFRS for SMEs if turnover is AED 50 million or less, and the cash basis if turnover is AED 3 million or less.

Keeping personal and business money apart is the single most useful habit. It makes the turnover test simple to prove. Regular bookkeeping keeps the running total visible, so the threshold never catches you by surprise.

How we help

For freelancers and sole establishment owners, we track turnover through the year, separate business and excluded income, and prepare the figures for the return and any relief election as part of our Corporate Tax filing service.

Frequently asked questions

Is the AED 1 million threshold based on profit?

No. It is based on turnover, meaning the gross income from your business activities in the calendar year, before any costs are deducted.

Does my salary count towards the AED 1 million?

No. Wage income is excluded from turnover and is not subject to Corporate Tax, whatever the amount. The same applies to personal investment income and real estate investment income that does not need a licence.

If my turnover drops below AED 1 million next year, can I deregister?

No. According to the FTA, once registered you keep your registration and file a nil return for years under the threshold. Deregistration applies when you stop all business activity.

Can a freelancer use Small Business Relief?

Yes, if the conditions are met, including revenue of AED 3,000,000 or less in the current and every earlier tax period. The relief now covers tax periods ending on or before 31 December 2029.