Other BriefingsForeign Owners Of UAE Property: Pay Tax, Or Become Resident
The UAE Ministry of Finance has just clarified the latest provisions under the corporate tax regime, as relates to the numerous non-resident investors in the UAE’s real estate market. Now, the situation has been made simple to understand.
Foreign companies and other ‘non-resident juridicial persons’ will be subject to UAE Corporate Tax on income derived from real estate and other immovable property in the UAE, and these entities will also need to register in the UAE for corporate tax purposes. The decision applies to immovable property held or used in a business, and that is held for investment purposes.
Younis Haji Al Khoori, Under-Secretary in the UAE Ministry of Finance, said: “The UAE’s Corporate Tax Law incorporates features that honour international taxation principles – and ensures neutrality between domestic and foreign companies earning income from immovable property in the UAE.”
However, should non-resident property owners in the UAE acquire resident status, it immediately means that any rental income or transaction gains they make on their real estate assets will not be subject to corporate tax.
Property visas are available for an investment of Dh750,000 (about US$205,000) applicable for two years, and for Dh2 million (about US$545,000) for ten years.
Also, domestic companies not licensed as real estate developers can also invest in property – and not be subject to corporate tax for rental income as well as capital gains from selling the asset.
This is actually a great incentive to encourage more foreigners to become residents in the UAE. Overseas individuals who are not yet resident will be tempted to do so given the corporate tax status.
The Dubai and Abu Dhabi property markets have been seeing an influx of overseas investors (and many of them would have acquired resident status linked to their property).
The UAE property market has been the biggest beneficiary from the various reforms the authorities have brought on the residency side. The UAE Golden Visa program continues to be attractive.
How Will Offshore Companies With UAE Property Holdings Be Treated?
In this category, offshore companies will be treated as UAE free zone companies.
Subject to free zone eligibility conditions, offshore companies need to classify their property portfolio in different categories:
- Properties located in a free zone and
- Properties located outside of the free zone.
In the first case, the 0 per cent rate will be applicable on income derived from other free zone persons in relation to commercial property. Commercial properties include those used exclusively for business, but does not include real estate used for residences, hotels, serviced apartments, and so on.
Transactions with non- free zone persons and everything under the second category will be subject to 9 per cent corporate income tax, applicable irrespective of the property owners status.
Foreigners requiring assistance with applying for UAE residency or needing assistance to set up bookkeeping compliance for their property rental income may contact Maria Kotova at dubai@dezshira.com
Related Reading
- UAE Announces Tax Ruling On Non-Residents Property Income
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