Is Your Side Hustle on UAE Tax Radar?

Stephen, an expat, had been living and working in the UAE for the past five years. He was a jack-of-all-trades, dabbling in various ventures. Stephen was a salaried employee at a multinational corporation, but his entrepreneurial spirit led him to explore other income-generating activities.

One day, while having his dinner, Stephen stumbled upon a new decree issued by the UAE government – the Federal Decree Law No. (47) of 2022. He had already heard whispers of it in his office, but he hadn't paid much attention until now. He became interested to understand how it would affect him at a personal level since he has multiple streams of income.

Stephen's primary source of income was his salary from the multinational corporation. He was relieved to learn that salaries, along with any bonuses or benefits, were exempt from corporate tax. "Phew," he sighed, "at least my main gig is safe!"

However, Stephen's side hustles were not the same story. He had a small online business selling handcrafted souvenirs from India and Pakistan. He also invetsed in the stock market, investing his savings in various companies listed on the UAE stock exchange. Additionally, he had also started renting out a spare room in his apartment on Airbnb.

The Corporate Tax Law stated that income from business activities exceeding AED 1 million would be subject to corporate tax. Stephen quickly calculated his annual turnover from his souvenir business and realized it was well below the threshold. "Thank goodness for small mercies," he chuckled, "my little souvenir shop is in the clear!"

His stock market investments were also exempt, as they fell under personal investment income "Looks like my risk-taking in the stock market has paid off, in more ways than one!" Stephen exclaimed.

However, the rental income from his Airbnb venture was a bit tricky. The law stated that real estate investment income was exempt only if it was not conducted through a license or required a license from a licensing authority. Stephen had been operating his Airbnb without a license. He realized he needed to check further to determine if he needed a license and how it would impact his tax liability.

As Stephen learned more, he discovered the concept of "business" and "business activity." The law defined business as any activity conducted regularly, ongoingly, and independently. Stephen's souvenir business clearly fit this definition, but he was confused about his Airbnb venture. He rented out the spare room, whenever he had guests. So, it was not regular and ongoing enough to be considered a business?

Stephen decided to consult Mr. Sehgal (a tax expert) to clarify his doubts. Mr. Sehgal explained that the frequency of his Airbnb rentals didn't matter as much as the fact that he was actively engaged in the activity to generate income. Therefore, it would likely be considered a business activity.

Stephen learned that if his total turnover from all business activities exceeded AED 1 million, and he would have to register for corporate tax and pay taxes on the income exceeding the threshold. He calculated his combined income from his souvenir business and Airbnb and realized it was still below AED 1 million. "Looks like I'm still in the safe zone," he thought with relief.

However, Mr. Sehgal advised Stephen that the law was new and constantly evolving. He advised Stephen to stay updated on any changes and to consult him if he had any further questions.