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UAE Property Tax Guide

 

Property tax / Real estate tax in Dubai, tax rates

 

Dubai can be easily be classified as the ideal place for real estate investment – for professional investors as well as for end consumers.

 

When speaking about taxation on profits from real estate in Dubai – there is no tax on properties payable by the investor– neither from the income received from the sale, nor from the rental income. The yearly fixed tax on property which is applicable in some countries is not available in the UAE either.

 

There are only some minor taxes on properties that are paid on real estate. These taxes are the following:

 

  • When you purchase or sell the property in Dubai – residential or commercial – there is the one-time fee of the land registry fee/tax which is 4%.  The fee is calculated from the contract sales-purchase price of the property and is payable to the land department on the day of the property ownership transfer.  This tax/fee is payable by physical persons or companies irrespectively.
  • When renting a property in Dubai there is a tax of 5% from the tenancy contract value. This tax is payable by the tenant of the property and is automatically added to the utility bill issued to the tenant and it is payable in instalments together with the water and electricity payments. In the case of commercial properties, this tax is 10%, its payment is processed the same way for residential properties.

 

In relation to inheritance – there are no inheritance taxes on real estate in Dubai ether – irrespective of the level of kinship. At the time of ownership transfer of the property under inheritance regular ownership transfer tax of 4% is applicable.

 

Taxation of real estate gains is independent of the residency of the property owner – inside or outside of the UAE. There are no limitations when transferring the money from the sale of the properties abroad, and there are any restrictions on currency conversions.

 

Under the applicable regulations, the property in Dubai can be purchased by foreigners and used for private or business purposes (depending on property type) or leased out. Property can be purchased by a foreigner on his name or on a name of a company registered in the UAE.  The taxation regime of real estate remains without any changes for private or for a company.

 

UAE Real Estate VAT Guide

 

VAT was introduced on 1 January 2018 in the UAE. As a general consumption tax on the supply of goods and services, its effects are applicable to supplies of real estate made in the UAE.

 

What is Real Estate

 

Real estate is generally considered to be property consisting of land or buildings, and includes

 

  • Any area of land over which rights or interests or services can be created;
  • Any building, structure or engineering work permanently attached to the land;
  • Any fixture or equipment which makes up a permanent part of the land or is permanently attached to the building, structure or engineering work.

 

What is a supply of real estate?

 

For VAT purposes, a supply of real estate is treated as a supply of goods (see Article 2 of VAT Executive Regulations). As a result, a supply of real estate involves the transfer of ownership of the real estate, or the right to use the real estate, to another person. The time of supply rules under Articles 25 and 26 of the VAT Decree-Law should be applied to real estate transactions according to the applicable circumstances.

 

Summary of VAT Liability of Supplies of Real Estate

 

If you supply…

VAT liability

A commercial Property

5%

A new residential property

0%

An existing residential property

Exempt

Bare Land

Exempt

A first supply of a charitable building

0%

A subsequent supply of charitable building

5%

 

A property located within a Designated Zone

 

Out of Scope

 

Disclaimer

This information is provided as a general guide only.

Source:  UAE Federal Tax Authority

Credits:  Atton Consulting