Managing Corporate Tax for Freelancers and Sole Establishments in the UAE

Freelancers and sole establishments in the UAE are subject to corporate tax only if their annual business revenue exceeds AED 1 million.

Corporate tax has changed how freelancers and sole establishments operate in the UAE. For years, many self-employed professionals worked without thinking about corporate tax in UAE at all. That changed when the UAE introduced a formal corporate tax framework.

Today, freelancers and sole proprietors need to understand where they stand, what applies to them, and when action is required. Ignoring the rules can lead to penalties, even if the business is small.

Corporate Tax Registration for Freelancers and Sole Establishments

Freelancers and sole proprietors must register for corporate tax if their business turnover exceeds AED 1 million in a calendar year. Turnover refers to gross business revenue, not profit.

If turnover stays below this threshold, corporate tax registration is not required, but proper records should still be maintained. Once registered, tax is calculated on net profit, not revenue.

Corporate Tax Rates

• • 0% tax on taxable profit up to AED 375,000.
  • 9% tax on taxable profit above AED 375,000.

Freelancers and sole establishments are considered natural persons conducting business. If income comes from professional or commercial activities, it may fall under corporate tax. This means many freelancers and sole establishments register but do not immediately pay tax, depending on profit levels.

Freelancers and Sole establishments can do corporate tax registration through the Federal Tax Authority portal, EmaraTax. 

Documents Required for Corporate Tax Registration for Freelancers & Sole Establishments

• Trade license or freelance permit
• Emirates ID and passport
• Business activity details
• Financial year information

Corporate Tax Filing for Freelancers & Sole Establishments

Registered freelancers and sole ownerships must file an annual tax return within nine months of the end of their financial year, regardless of whether tax is due. Filing deadlines are linked to the financial year-end selected during registration.

• Declaring taxable income
• Reporting allowable business expenses
• Submitting records through the FTA portal

Even if no tax is payable, corporate tax filing is still required once registered.

Corporate Tax Fines & Penalties for Non Compliance

Corporate tax fines and penalties apply even when no tax is due. This is often misunderstood.

• AED 10,000 for late registration
• AED 1,000 for late tax return filing
• Penalties for incorrect or incomplete submissions

These penalties can add up quickly for small businesses.

Compliance, Filing, and Record-Keeping Obligations

Accurate accounting and bookkeeping is not optional. Freelancers must maintain proper financial records to support tax filings.

• Maintain Records: Keep detailed financial records of all income and expenses for at least five to seven years to ensure compliance.
• Separate Finances: Use a business bank account to separate personal and professional finances, which simplifies accounting and compliance.
• Seek Advice: The specific application of the law can be complex, especially concerning free zone operations or specific deductions. Consulting with a qualified tax consultant is recommended. 

Common Corporate Tax Mistakes Freelancers Should Avoid

Many freelancers assume corporate tax does not apply if they already pay VAT. Others believe free zone licenses are automatically exempt. These assumptions often cause problems later.

Corporate tax and VAT are separate systems. Having a free zone license does not remove corporate tax obligations if thresholds are crossed.

Navigating Corporate Tax for Sole Establishment 

Corporate tax rules are new, and many freelancers are navigating them for the first time. Small mistakes during registration, expense classification, or filing can create long-term issues.

At Xact Auditing, we work closely with freelancers and sole proprietors across the UAE. We help assess registration requirements, prepare accurate filings, and ensure compliance without unnecessary stress.

The Xact Auditing Advantage

If you are a freelancer or sole establishment operating in the UAE, understanding corporate tax is no longer optional. Xact Auditing provides clear guidance, registration support, and corporate tax compliance services tailored to self-employed professionals. Speak with our team today to stay compliant, avoid penalties, and focus on growing your work with confidence.