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Impact of Corporate Tax on UAE Real Estate Investors

Businesses and individuals that are actively running real estate as a business enterprise would be subject to corporate tax of about 9%.

In accordance with the new corporate tax regime, this tax would be applicable to net profits that are above AED 375,000.

Corporate tax

The said corporate tax would also be applicable to real estate development because it will be treated as a business, which means that 9% would be charged on net profits higher than AED 375,000.

It should be noted that the corporate tax is applicable to both free hold and lease hold assets, as no distinction has been made between the two under the new laws.

If a resident or foreign individual owns real estate for the purpose of investment, whether directly or via a foundation or trust, which gives investment income, then no corporate tax would be applicable.

However, this would only be applicable if the real estate is not owned by a corporate entity. Capital gains tax would become applicable on the sale of the real estate, if it is under the ownership of a corporate entity.

Income tax

Another important thing to bear in mind is that the income generated from an immovable property is generally taxed in the country in which the property in question is located.

This means that if a non-residential juridical individual, or a foreign company generates any income from a property located in the United Arab Emirates, then they would be required to pay tax on the income.

Moreover, a company would have to register in the United Arab Emirates for the purpose of corporate tax, regardless of the income it generates.

Real estate investment trusts (REITs) have been given a relief from corporate tax, which would be applicable on income generated from investment in the region, as long as the relevant conditions apply.

Other details

It should be noted that many corporates that hold assets in the UAE, but have not listed the asset with its market value in their books of accounts will have to deal with the revaluation of assets.

This would be applicable to intangible, financial as well as immovable assets. The transitional provisions will give them room to revalue their assets in order to avoid any additional tax liability that may arise due to profits or losses.

New legislation has recently been introduced in the UAE for helping in driving the growth of the real estate industry in the country.

The purpose of the new regulations is to facilitate the development and execution of strategies that can trigger expansion in the real estate sector and align it with the modern development initiatives in the region.

The wide-ranging laws encompass a number of real estate activities, such as pricing of developments, mortgage regulations, property registration and investors’ rights in the emirate.

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