If you’re a freelancer in the UAE, it’s important that you know your tax obligations. You’ll have to register and pay corporate tax and VAT if your business activity and income meet the eligibility criteria.
UAE Corporate Tax for Freelancers
If you’re a freelancer in the UAE, or running a small solo business, you should keep yourself updated on the corporate tax rules. As your business grows, it’s important to know when tax applies, how it’s calculated, and what happens if you don’t file on time.
Corporate tax is a government tax on business profits. In the UAE, it applies to:
- Registered companies
- Self-employed individuals
- Freelancers
Freelancers are considered to be “carrying on a business” and have to pay corporate tax if they are eligible. This includes anyone with a freelance permit, self-employed license, or acting as an independent contractor.
Here’s how it works:
- If your annual turnover is more than AED 1 million, you are considered to be running a business and must register for corporate tax.
If your income is below AED 1 million, you are exempt from tax unless you have other taxable business activities.
How is Corporate Tax Calculated for Freelancers?
Freelancers are taxed on net profit, not their total income. This is how it works:
Taxable income = Total freelance earnings – eligible business expenses
- The first AED 375,000 of profit is taxed at 0%.
- Any amount above AED 375,000 is taxed at 9%.
If you don’t register for corporate tax on time, you can be fined AED 10,000. You can also be fined if you file late or pay the wrong amount.
Zero Tax Free Zones for Agencies and Freelancers
- 0% corporate tax: Businesses in a free zone can pay 0% corporate tax on qualifying income, so they keep more of what they earn. To qualify, the business must do approved activities and have a real office and staff in the free zone.
- 100% ownership: You can fully own your company without needing a local partner. You can also send all your capital and profits back to your home country without any rules stopping you.
- Strategic locations: Free zones are located near big airports and sea ports, giving you easy access to international markets.
- Meydan Free Zone
- RAKEZ (Ras Al Khaimah Economic Zone)
- Dubai Internet City
- Sharjah Media City (SHAMS)
- International Free Zone Authority (IFZA)
Get Certified Expert Help with Your Books
VAT in UAE
- If your total taxable income exceeds AED 375,000 in the last 12 months or is expected to exceed that in the next 30 days, you have to register for VAT.
- Even free zone companies have to register for the 5% VAT.
- You need to report standard-rated sales (as reported by the Emirate), zero-rated or exempt supplies, and any reverse-charge items.
- You should also include the input VAT on expenses that you’re allowed to recover.
- It’s also recommended that you keep your tax records for at least five years.
- For clients outside the UAE, many service exports can be zero-rated if certain conditions are met. These include the recipient being outside the UAE or in an Implementing State, along with other checks.
- For foreign platforms and tools like Meta, Google Ads, or SaaS products, the reverse charge often applies. You need to report output VAT and, if it’s fully recoverable, you can usually claim the same amount as input VAT in the same return.
Freelancer Tax Filing in UAE
- Working with an expert UAE tax services can help make your corporate tax and VAT filing much easier.
For Corporate Tax
- You only need to register for corporate tax if your freelance income exceeds AED 1 million in a calendar year.
- Registration should be done on the EmaraTax portal by March 31st of the year you exceeded AED 1 Million in revenue.
- Corporate tax has to be filed within 9 months of the end of your tax year also on the EmaraTax portal.
For VAT
- You’ll need to submit VAT returns electronically through the FTA’s EmaraTax portal.
- Most freelancers are assigned a quarterly VAT period, meaning you file a VAT return
every 3 months. Some may have monthly periods based on revenue. - Each VAT return is due 28 days after the end of the tax period.
How Can Freelancers Stay Tax Compliant in the UAE?
- Track your expenses and deadlines closely. This will make it easier to file your returns on time.
- Keep your tax records for at least five years. This includes invoices, past returns, and your books.
- Stay updated on the UAE’s tax laws. You can either follow the FTA for updates or work with a tax consultant who can inform you if anything changes.
- If you’re dealing with VAT, you can use software to automate your invoices and track your transactions.
Get Expert Tax Help From A&A Associate
A&A Associate houses expert tax consultants who can help freelancers and agencies with registration and filing their corporate tax and VAT. Get in touch for a free consultation!
