Clearing the Tax Transparency Confusion for UAE Property Investment

UAE Corporate Tax
April 16, 2024 | | Corporate Tax, UAE VAT |

Understanding Taxes for UAE Property Investment

The real estate market in the UAE is constantly changing and developing. The market has become one of the most essential sectors in the UAE’s economy. There are numerous real estate developments and projects are constructed within a modern architectural style annually. This fact has drawn the attention of local and foreign investors to invest in the real estate market in the United Arab Emirates.

The United Arab Emirates has issued several rules regarding the real estate investment. The UAE Corporate Taxes for real estate investment is one of such rules in the United Arab Emirates. The introduction of the UAE Corporate Tax has marked an enormous shift in the UAE property market. In addition, the introduction has caused several tax transparency confusions for the UAE property investment.

The guide will highlight the Clarity of UAE property tax laws. In addition, we will highlight every crucial aspect of the UAE Corporate Tax for UAE property investment. Furthermore, we will also shed light on the UAE property tax exemptions.


UAE Corporate Tax – overview

The Ministry of Finance (MoF) in the UAE issued Cabinet Decision No. 56 of 2023 for the reason of Federal Decree-Law No. 47 of 2022. The decision clarifies that foreign businesses situated in the Mainland of the United Arab Emirates under a permit or trade license and non-residential juridical persons will be subject to a 9% Corporate Tax on earnings derived from an immovable property used in business or investment purposes within the United Arab Emirates.

However, there is one condition income from the immovable property must exceed AED 375,000*. In addition, businesses involved in real estate management, development, construction, agency, and more will be subject to UAE property taxes or Corporate Tax.


UAE property tax guidelines under the Corporate Tax

The Ministry of Finance issued a clarification under which foreign companies and other non-resident juridical persons will be subject to the nine percent Corporate Tax on income earned from real estate and other immovable properties in the United Arab Emirates.

The ministry included that these laws apply to both immovable property held in a company and used for investment purposes within the country. The real estate industry is one of the most crucial sectors in the economy of the United Arab Emirates. The industry is a significant contributor to the UAE’s economy.

The United Arab Emirates (UAE) introduced a Corporate Tax on 1st June 2023. The country has asked all locals and foreign companies to register themselve under the UAE Corporate Tax within the period of one year to avoid penalties and other UAE property tax obligations.

The Clarity on UAE property tax laws comes after the issuance of Decision No. 56 of 2023 on a Nexus of non-resident Persons in the United Arab Emirates for the purpose of Federal Decree-Law No. 47 of 2022.

Younis Haji Al Khoori, undersecretary of the Ministry of Finance in the United Arab Emirates has mentioned that the Corporate Tax treatment of income derived from the real estate and other immovable properties in the UAE by foreign juridical persons is connected with the international best method specify that income derived from the immovable property within the country in which such country is located.


The ministry also mentioned that the Corporate Tax will be based on the net income basis. Therefore, relevant expenditures that meet the conditions set out in the UAE Corporate Tax law will be deducted when calculating taxable income.



Exemption of Corporate Tax in the UAE for property investment

Indeed, the UAE’s Corporate Tax is applied to all companies operating within the United Arab Emirates. However, there are a few cases where property investors in this country can be exempted from the UAE Corporate Tax for property. The following is the list of scenarios when property investors become exempted/relief from the UAE Corporate Tax:


  • The business’s income from the immovable properties is less than AED 375,000.
  • People who make an investment in the real estate property within their personal capacity.
  • Individual investors often use Real Estate Investment Trusts (REITs), which are corporations that own, manage, or finance income-generating assets, like stores, apartments, and buildings, as an instrument for real estate investments. Investors who have invested in Real Estate Investment Trust (REITs) in the form of shares or securities earn a portion of the rental income generated by these assets.
  • Companies operating solely in the free zone areas in the United Arab Emirates
  • Businesses that are included in the extraction of natural resource



Impact of the UAE Corporate Tax law on the real estate market in the UAE

The Corporate Tax law in the United Arab Emirates will significantly affect the UAE real estate market. It will allow business owners to operate their companies transparently. In addition,  the demand for residential properties will remain stable because there is no taxation levied on people.

In the short term impact, investors may need to reassess their strategies and evaluate the financial implications of the tax on their investment.  This may lead to market adjustment as stakeholders adapt to the new tax environment.

In contrast, the long-term prospects for the United Arab Emirates (UAE) real estate market remain optimistic.  The sustained demand for real estate may drive prices higher.  It creates significant value and potential opportunities for investors. The real estate market is poised for growth and enhanced per-square-value, giving attractive prospects for brilliant investors who can navigate the intricacies of the new tax regime.

Moreover, the Corporate Tax law will most likely affect companies in the industrial and retail sectors that are still recovering from the effects of the COVID-19 Pandemic. This rule is also impacting the companies that may already be struggling to pay their rent and maintain their profitability. As a result,  there could be less demand for industrial and retail space in the long run.


How can Flyingcolour Tax Consultant help you?

The Ministry of Finance (MoF) has applied UAE Corporate Tax to all businesses operating in the country. However, the ministry has also exempted some properties from the UAE Corporate Tax. Flyingcolour Tax Consultant can help property investors pay the UAE Corporate Tax. In addition, we can clear up any confusion about UAE property tax guidelines.

To learn more about Understanding Taxes for UAE Property Investment, book a free consultation with one of the Flyingcolour team advisors, simply call +971 50 5585305 or send WhatsApp messages to +971 4 4542366. you can also drop an email to info (at) flyingcolour (dot) com.

This article was published on 16-04-2024. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent updates or changes.

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