Corporate Tax for Freelancers in the UAE: What Happens When Your Revenue Crosses AED 1 Million?
There is a significant increase in the number of freelancers here in the UAE, especially in sectors like consulting, Information Technology, digital marketing, design services, coaching and professional services. With the introduction of the UAE Corporate Tax, many freelancers are now asking an important question:
“What happens if my freelance revenue crosses AED 1 million?”
This blog explains how the Corporate Tax will apply to freelancers in the UAE, what changes once their revenue exceeds AED 1 million and how freelancers can remain compliant with regulations while managing their tax exposure effectively.
Disclaimer: The examples used in this blog are fictional and created solely for educational purposes.
Legal Framework for Freelancers under UAE Corporate Tax
Corporate Tax is governed by:
-
Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
-
FTA Corporate Tax Guides and Public Clarifications
Under the law, individuals carrying out business or professional activities (including freelancers) can be treated as Taxable Persons if their income exceeds specified thresholds ie AED 1 million.
Are Freelancers Subject to Corporate Tax in the UAE?
Yes, freelancers will fall under the scope of Corporate Tax if they are considered to be carrying on a business or business activity in the UAE.
This includes freelancers working under:
-
Freelance permits
-
Professional licences
-
Sole establishments
-
One-person companies
The AED 1 Million Revenue Threshold Explained
What Is an AED 1 Million Threshold?
If the freelancer earns a total annual revenue over AED 1 million, they are:
✔ Considered to be a natural person carrying out taxable business
✔ Required to register for Corporate Tax within the time frame
✔ Required to file annual Corporate Tax returns
If the annual revenue is below AED 1 million, the individual is outside the scope of Corporate Tax, provided the income earned is not earned through a legal entity.
-
This threshold applies to natural persons, not companies.
What Happens After Crossing AED 1 Million?
Once a freelancer earns revenue of more than AED 1 million :
1 Corporate Tax Registration Becomes Mandatory
The freelancer should register for Corporate Tax with the Federal Tax Authority (FTA) within the prescribed timelines.
2 Taxable Income Must Be Calculated
Corporate Tax is calculated not on revenue, it is on net taxable profit, after deducting the below:
-
Business expenses
-
Office or co-working space rentals
-
Software subscriptions
-
Expenses for marketing
-
Professional fees
3 Corporate Tax Rates Apply
-
0% on taxable income up to AED 375,000
-
9% on taxable income exceeding AED 375,000
4 Record-Keeping and Compliance Obligations
Freelancers must keep in mind the following requirements:
✔ Maintain accounting records as per IFRS
✔ Keep invoices and contracts as supporting documents
✔ File Corporate Tax returns annually
✔ Comply with FTA audit requirements
Practical Examples
Example 1 – Freelancer Below Threshold
A freelancer who is an interior designer earns AED 750,000 in a year.
➡ Revenue is below the AED 1 million threshold
➡ Not required to register for Corporate Tax
➡ No need for annual Corporate Tax return filing
Example 2 – Freelancer Crossing AED 1 Million
A freelance IT consultant earns AED 1.3 million in revenue, also having AED 400,000 expenses.
➡ Taxable profit would be AED 900,000
➡ Corporate tax will apply as follows : 0% tax on Taxable income up to AED 375,000
➡ Taxed at 9% on the remaining AED 525,000
Example 3 – Freelancer with Freelance Permit + Side Income
A management consultant earns the below:
-
AED 950,000 from freelancing business
-
AED 200,000 from consultancy contracts
➡ Combined revenue is AED 1.15 million
➡ Corporate Tax will be applied
Common Mistakes Freelancers Make
- Assuming freelancers are exempt from the scope of Corporate Tax
- Confusing VAT threshold with Corporate Tax threshold
- Not maintaining a proper track of revenue from different contracts
- Ignoring registration deadlines
- Not maintaining documentation for expenses
These mistakes can result in penalties and scrutiny by FTA.
Should Freelancers Consider Incorporation?
In some cases, forming a legal entity may:
✔ Work well on tax planning
✔ Can separate personal and business risk
✔ Enhance credibility in dealings with clients
✔ Allow a wider range of expenses
However, incorporation of the company should be evaluated carefully from the perspective of tax and compliance requirements.
How FlyingColour Tax Consultant Can Help Freelancers
FlyingColour Tax Consultant assist freelancers with:
✔ Corporate Tax eligibility assessment
✔ CT registration and filings
✔ Expense optimisation and record-keeping
✔ VAT advisory (if applicable)
✔ Long-term tax structuring advice
Frequently Asked Questions (FAQs)
1 Is Corporate Tax applicable to all freelancers in the UAE?
No. It applies only if their annual revenue exceeds the AED 1 million threshold.
2 Is the AED 1 million threshold based on profit or revenue?
It is calculated on gross revenue, not on profit. Ie after deducting all allowable expenses from revenue
3 Do freelancers need to register for VAT as well?
Only if taxable supplies exceed the registration threshold of AED 375,000.
4 Can freelancers claim business expenses under Corporate Tax?
Yes, allowable and properly documented business expenses are deductible.
5 What happens if I don’t register after crossing AED 1 million?
FTA will impose penalties and compliance actions.
To learn more about Corporate Tax for Freelancers in the UAE, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.