As UAE saw its first-ever form of tax, i.e., Corporate Tax 2023 coming into the picture, the number of questions has been on the rise, and the biggest one is whether it is valid on properties in Dubai. One of the major doubts is who has to mandatorily file taxes and who is free from the tax slab. Amongst all of this, there are also several confused real estate investors wondering whether they come in the category.
To put an end to all these queries, the Ministry of Finance had clarified the rules in a cabinet decision. This outlines the regulations for foreign companies and non-resident property owners in Dubai or across the country.
UAE’s New Corporate Tax Rules in 2023 and Real Estate
Corporate Tax on Properties in Dubai Under Corporate Title
The UAE Ministry of Finance has introduced Cabinet Decision No. 56 of 2023, which outlines the criteria for foreign companies and non-resident entities to be liable for Corporate Tax in the UAE. Under this decision, they will be required to pay taxes on income earned from real estate and other immovable property located in the UAE.
These companies will need to register with the UAE authorities for Corporate Tax purposes. This rule applies to immovable property used for business activities as well as property held for investment purposes in the UAE. The Ministry of Finance also recently announced that non-resident companies owning property in the country will have to pay Corporate Tax based on their net income.
The good news is that these companies can deduct relevant expenses that meet the requirements mentioned in the Corporate Tax Law when calculating how much they owe. This deduction helps in reducing their taxable income.
Corporate Tax on Properties in Dubai Under Individual Title
If you’re an individual, whether foreign or resident, and you own immovable property directly or through a trust, foundation, or another vehicle that’s transparent for Corporate Tax purposes, you usually won’t have to pay Corporate Tax on the income you earn from it. However, if you have any sort of involvement in a licensed business activity, there won’t be a tax exemption then.
On the other hand, if real estate investment trusts and other approved investment funds meet all criteria and conditions, they might not have to pay Corporate Tax on income attained from any immovable property across the UAE.
Bottom Line: Neutrality Between Domestic & Foreign Companies
Undersecretary of the Ministry of Finance, Younis Haji Al Khoori, stated, “The Corporate Tax treatment of income derived from UAE real estate and other immovable property by foreign juridical persons is in line with international best practice which stipulates that income derived from immovable property is taxable in the country in which such property is located.”
He also added, “The UAE’s Corporate Tax Law incorporates features that honor international taxation principles and ensures neutrality between domestic and foreign companies earning income from immovable property in the UAE.”
Would you like to know more about corporate taxes and fees involved in any real estate investment?
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