Corporate Tax Liability  Real Estate & Immovable Property

The United Arab Emirates is a magnet for investors and businesses because of its robust economy, strategic location, and growing population. However, when it comes to real estate and immovable property, foreign companies have to navigate the complexities of liabilities for corporate tax or Real Estate Taxation.

 Understanding the implications and obligations of Corporate Real Estate Tax is essential for foreign companies conducting in the country. A recent cabinet decision has clarified the taxation of revenue-deriving real estate companies for people and companies. However, there are numerous liabilities of corporate tax or Commercial Real Estate Tax.

 If you are among those who are desperate to know everything about Commercial Real Estate Tax, then you should read this article. In this article, we will discuss everything about corporate tax Liabilities that will help you with Corporate Tax Planning for Real Estate.

What Is The Rate Of Real Estate Corporate Tax Uae?  

The rate of Corporate Real Estate Tax in the United Arab Emirates is 9 percent. This tax is applied to the income derived from the ownership and use of real estate in the United Arab Emirates.

Plus, this tax additionally applies to commercial real estate investment and residential property. It is essential to note that the tax does not imply the value of property, but rather implies the income you have derived from your property.

The tax also applies to businesses that own or rent property or real estate property in the United Arab Emirates, foreign companies, and non-residential judicial people alike. The tax also applies to both immovable property in the United Arab Emirates. Plus, the tax applies for investment purposes in the United Arab Emirates.

How Does The UAE Corporate Tax 2024 On Real Estate Work?

 The Corporate Real Estate Tax is calculated on a net basis. This means that deductions are allowed for expenses incurred in the development of income. Depreciation, interest, and other costs related to the ownership, use, or disposal of real estate are some of these expenses.

The corporate tax for real estate is due for every year. Businesses are required to file a tax return and pay their dues of tax by the end of the 9 months following the end of each Tax year. In order to avoid penalties, the government of the UAE has asked all businesses and foreign companies to register for Commercial Real Estate Tax within the time of one year. However, if you want to be safe from any kind of penalty, then you should adopt Real Estate Tax Strategies.

Tax Treatment Of The Property Held By A Company

When it comes to Corporate Tax Planning for Real Estate, there are three categories of properties that you should know in order to effective planning. Here is the list of three categories of properties in the United Arab Emirates:

➡️ Non-exclusivity property: The non-exclusivity properties are those types of properties that include real-estate property, which is used non-exclusively as a place of residence or accommodation, including hotels, motels, bed and breakfast establishments, serviced apartments, and more. The income that you have earned from such kinds of properties will be subjected to a 9 per cent corporate Real Estate Taxation.

➡️ Commercial properties under free zone: Suppose your property is commercial and located in the free zone of the UAE. In that case, the tax treatment will be indeed different from people who come with the status of Qualifying Free Zone Person (QFZP) to those people who are treated as regular taxpayers. Suppose the owners of the commercial property come with QFZP, and the other party who makes a transaction is also established in the free zones. In that case, the income earned from such activities is classified as Qualifying Income and subject to corporate or Commercial Real Estate Tax at the rate of zero per cent.

➡️ Commercial property located in the Mainland: In some cases, the party of the transaction is established outside the Free zone or the owner of commercial properties does not qualify for Qualifying Free Zone Person (QFZP), the income source from the commercial property located in the Free Zone are subject to the Corporate Real Estate Tax at the rate of 9 percent.

By knowing these treatments for corporate tax for real estate, you can effectively plan and create Real Estate Tax Strategies.

Corporate Liability On Real Estate And Immovable Property

 The Landscape of Corporate Real Estate Tax in the UAE took an enormous turn with the latest clarification issued by the Ministry of Finance. As per the clarification, foreign businesses and non-resident jurisdictions are subjected to the corporate tax of 9 percent on income generated by real estate properties in the UAE.

This move by the UAE government reflects the commitment of the United Arab Emirates to align the international tax process while keeping its position as a home for global investment.  Here are other Corporate Tax Liability on Real Estate and Immovable Property for Real Estate Tax Optimization

➡️ Scope of Real Estate Taxation: The scope of taxation extends to both immovable properties used in business operations and those held for the purposes of investment. This means that all businesses that earn income from real estate in the UAE are subject to the new corporate tax.

➡️ Uses and effects: The introduction of new corporate and Commercial Real Estate Tax comes with uncountable uses and effects. The following are the effects and uses of corporate tax in the UAE:

➡️ Discipline: The new tax in the UAE ensures that the companies in the UAE are paying their fair of taxes.

➡️ Generate revenues: The new tax will generate revenue for the government of the UAE that can be used to fund essential programs and projects.

➡️ Align with international practices: The new tax aligns the UAE with international tax practices that make it more attractive for foreign investors.

➡️ Effective dates: The new tax will be effective from 1 June 2023.

Understanding these liabilities will definitely help you in Real Estate Tax Optimization.

What Is Exempted?

The ministry real estate investment income earned from immovable property owned by foreign or UAE resident people, either directly or via a trust, foundation, or other vehicle that is treated as fiscally transparent, would generally not be subject to Corporate Real Estate Tax provided it is not a licensed business activity.

The real estate investment trusts and other qualifying funds of the investment may benefit from an exemption from Real Estate Tax Optimization on incomes derived from the investment in UAE property. However, there are specific conditions that you should meet.

How does Flying Colour Tax help you?

Flying Colour Tax comes with the ability to help clarify all your doubts about corporate tax for real estate. Furthermore, we can help you fill your business’s corporate tax.

To learn more about orporate Tax Liability on Real Estate and Immovable Property, book a free consultation with one of 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.

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