Tax  freelancers in the UAE

Tax implications for freelancers in the UAE. Let’s begin by clearing the confusion.

• The UAE government does not charge tax on personal income.
• In the UAE, income from freelancing is considered a taxable business activity (not pure personal income)—involving the exchange of goods and/or services for payment.
• The UAE government levies VAT as freelancer taxation on earnings from freelancing.

Let me put this in simple words—if you work under a freelancer visa or permit in the UAE, any income you earn from your freelance projects is considered business income. So, if you think that there is no freelancer income tax in the UAE, it is clearly a dangerous myth.

But your bank interest, any pay from a salaried job, or stock investment are not taxable under VAT or corporate law in the UAE. So, we can confidently say that the UAE is still very tax-friendly for freelancers, but not completely tax-free.

In this guide, we have explained freelancer income tax rules in the UAE, whether you are a local national or a foreign resident holding a freelancer visa in the UAE.

Tax obligations for freelancer visa holders in the UAE

Before 2018, freelancers in the UAE could take home all the money they earned from their work. But things changed thereafter with the introduction of VAT (Value Added Tax) in 2018 and the corporate tax in 2023 across the Emirates. Now, let us explore freelancer tax implications in the UAE, freelancer tax guidelines, and tips for freelancer tax filing.

What is VAT registration for freelancers in the UAE

VAT is a consumption tax guided by Federal Decree-Law No. 8 of 2017 to diversify revenue, and it is collected and managed by the UAE Federal Tax Authority (FTA). Currently, a 5% VAT is applied to freelancers if their income exceeds a certain threshold:

• Mandatory VAT registration: Annual taxable turnover exceeds AED 375,000
• Voluntary VAT registration: AED 187,500–375,000

Volunteer VAT registration in the UAE, as the term speaks for itself, is a choice for freelancers. But we strongly recommend Volunteer VAT registration because:

• You can reclaim VAT on business-related expenses, bringing you cost savings in the long run.
• VAT-registered freelancers are believed to be more credible and professional.
• It ensures transparency and freelancer tax compliance in their activities.

This truly makes a difference when you’re bidding for bigger companies or government contracts. Check out the complete overview of the VAT registration process in the UAE.

Exemptions apply

If you are a UAE freelancer working with foreign clients, then you have to pay no VAT. For example, if you get a freelance visa in the UAE and work for non-UAE clients, you do not pay 5% VAT to the UAE government. This is because freelancing from the GCC region to foreign clients in other countries is considered the export of services. This is a big benefit—you can work at competitive pricing and avoid tricky VAT refunds for them.

UAE corporate tax law for freelancers, tax implications for freelancers in the UAE

Corporate tax is another tax obligation for freelancers in the UAE. It was introduced in 2023 under Federal Decree-Law No. 47 of 2022 at the standard freelancer tax rates of 9% on taxable income (business profits) exceeding AED 375,000.

Now, here we need to understand two things—the UAE government has introduced two thresholds for corporate tax—one for companies or businesses and the other for individuals.

For companies, only profit exceeding AED 375,000 is taxable. For freelancers, this means if you have registered your freelancing services as a legal business entity (you are providing freelancing services under a legal business name), you are most likely to pay corporate taxes.

For example, suppose you are providing freelancing work as a company and your annual income reaches AED 560,000 in a calendar year, then:

Net annual income: AED 560,000

Taxable income: AED 185,000 (560,000 – 375,000)

Total tax you pay: AED 16,650 (9% of 185,000)

For small businesses and individual freelancers—like a solo freelancer, a part-time freelancer, or if you are just starting—if your total annual revenue (not profit) is less than AED 1 million, then you are exempt from corporate tax, even if your profit exceeds AED 375,000. The same applies to small business owners.

For example, suppose you are a freelance graphic designer making AED 800,000 in a calendar year. Then, you would not pay corporate tax because of the AED 1 million exemption. Next year, if your gross revenue is, say, AED 1.5 million, you would pay corporate tax on the profit above AED 375,000.

We must say, this is—from front and centre—the lowest corporate tax rate in the world, making the UAE true to its image as a business- and tax-friendly country.

Our expert tip

Freelancer tax deductions can really make a difference. Deduct business expenses to reduce your taxable profit legitimately. For example, you can show yourself as an employee to your company and give yourself a reasonable salary. Salaries always count as an expense to the company. Plus, you do not have to pay taxes on this personal income to yourself.

Taxes for freelancers in UAE Mainland vs the Free Zone

Corporate tax rules for freelancers (individuals or companies) are the same as discussed above. On the other hand, a Qualifying Free Zone Person (QFZP) can enjoy 0% corporate tax as freelancer tax rates on qualifying income (from other free zones or foreign clients) even beyond the AED 375k profit threshold. Non-qualifying income is the income directly from a mainland UAE client, and it is subject to 9% corporate freelancer taxation.

Plus, unlike free zone freelancers, they can work for clients anywhere across the Emirates without any restrictions. When it comes to VAT, both mainland and free zone freelancers follow the same rules as discussed above.

How to stay compliant: Freelancer tax strategies

No doubt, the UAE is highly tax-friendly for freelancers. Although the region has levied few and lenient tax rules for freelancers, these are strictly enforced. Even minor noncompliance can result in severe consequences like legal actions, substantial financial fines, or even cancellation of the freelancer’s visa or permit.

So, it is very important to stay ahead of changing rules and ensure 100% freelancer tax compliance. Below are some important tips you must follow to achieve efficiency and compliance with the UAE’s freelancer tax implications:

• The corporate tax landscape and VAT are new concepts in the UAE, and they keep evolving. So, it is very important to keep an eye on new rules, decisions, and guides.
• Do not let a busy project miss tax deadlines. Mark your calendar and set reminders for all key deadlines like VAT return filings, corporate tax return filings, renewals, etc. Otherwise, be ready to pay substantial late fees.
• Maintain proper records like receipts, invoices, contract copies, etc., which can be used as evidence for tax exemption. Maintaining records will also prevent possible hassles that you may face otherwise.
• Do not hesitate to seek professional support from a freelancer tax consultant.

Takeaway: Count on professionals to stay tax compliant, Tax implications for freelancers in the UAE

Whether you are an individual service provider or running an agency as a freelancer, staying informed and compliant is key. But we understand that navigating freelancer tax laws in a foreign country like the UAE can be tricky.

That is why, at Connect Group, we not only help with a freelance visa in the UAE but also walk you through tax rules and regulations. We can help you navigate freelancer tax guidelines, freelancer tax filing, and calculate freelancer tax deductions. We also keep you updated on the latest freelancer tax laws and decisions, remind you of deadlines, and share freelancer tax strategies. You can also reach us for professional freelancer tax consultant services.

Sources for tax implications for freelancers in the UAE https://en.wikipedia.org/wiki/Taxation_in_the_United_Arab_Emirates