Freelancing and Taxes in the UAE

Flexibility is one of the many reasons freelancing is growing in popularity. Freelancing appeals to people who value independence and autonomy since it gives them the option to choose tasks that fit with their interests and goals and work on a flexible schedule. Working remotely and communicating with clients worldwide has also been simpler thanks to technology and the internet.

The United Arab Emirates has an increasing demand for freelancers as well. More and more UAE companies are looking for freelancers to help them compete in the global market. Businesses value the possibility of cutting down on the overhead costs that come with hiring a full-time employee.

The UAE has introduced several categories of freelance visas to attract brilliant minds to the country. The permit identifies the freelancer as a sole practitioner and enables them to conduct business under their own name. Multiple free zones across the UAE, such as twfour54, Ras Al Khaimah Economic Zone, Dubai Media City, Dubai Internet City, Dubai Knowledge Park, Dubai Design District, Ajman Free Zone, offer a wide range of freelance visas to residents and foreigners to work in the UAE. Freelancers can work across the UAE in their relevant field irrespective of whichever free zone they apply for visa. The UAE’s laws also offer a wide range of legal protections for freelancers, supporting their interests and rights. 

However, understanding the UAE tax laws is necessary for determining the tax obligations and compliance requirements for freelancers. 

VAT Law

In the event that the value of freelancer’s supply exceeds Dhs 375,000 within 12 months, they will need to register for VAT. The 5% VAT is most commonly applied to goods and services in the UAE, including freelance services. 

Corporate Tax Law

If a freelancer derives a turnover of more than AED 1 million revenue annually from doing “business” or “business activity” in the UAE, they will be subject to corporate tax.

Corporate tax only applies to income received from businesses or commercial activities carried out. Wage (employment income), Personal Investment income, and Real Estate Investment income are out of scope of CT and not taken into account for the purpose of determining the AED 1 million threshold.

Business profits will be taxed at a headline rate of 9% over the threshold of 375,000 AED, while low earners with income less than 375,000 AED will not be taxed (0%).

The CT law also offers some reliefs to reduce administrative requirements.

Tax Compliance

Tax registration, filing tax returns, and paying any applicable taxes are among the duties outlined in the tax legislations. Not meeting tax requirements could lead to hefty penalties.

The UAE tax rates still remain low compared to other low-tax hubs around the world, making it still among the most attractive jurisdictions to move to. Consulting with a tax advisor who is well-versed with UAE regulations is strongly advised in order for freelancers to correctly navigate the system and be able to have a better tax planning.

For more information, contact us at +971 4 4478931or email finance@trinitytaxaccounting.eu.