The real estate industry in the UAE is thriving due to the favorable tax provisions for individual investors. Natural persons who own real estate for personal gain are not subject to corporate tax unless they engage in business activities requiring a license. This ensures that both resident and foreign investors have a level playing field when it comes to real estate investments. However, those conducting trade activities that require a license will be subject to a nine percent corporate tax on profits exceeding a certain threshold.
It’s important for investors to understand the tax implications of different scenarios, such as holding properties for rental income or managing properties through a management company. Income received through a management company remains exempt from the nine percent tax, but establishing a sole establishment or company to manage properties may make the income subject to corporate tax. Holding properties through family foundations also offers a tax-free option for investors looking to maximize their returns.
For companies, including those engaged in real estate management, construction, development, agency, and brokerage activities, the tax implications are different. Companies are subject to a nine percent tax on income above a certain threshold, with some operating within free zones being eligible for a zero percent tax rate. However, it’s important to clarify what constitutes a ‘commercial property’ as only commercial properties located in free zones can benefit from the zero percent tax rate.
Non-resident companies holding real estate in the UAE or deriving income from UAE real estate may also be subject to corporate tax and require corporate tax registration in the UAE. The UAE’s tax system aims to facilitate investment in the real estate market while ensuring that businesses contributing to its development are duly taxed, except those in free zones after meeting certain conditions. The government’s commitment to positioning real estate as a key industry is further highlighted by the enticing residency golden visa scheme, aimed at attracting global interest in the years ahead.
