UAE Tax on Real Estate Investments

Understanding the New Tax Guidelines for Foreign Real Estate Investors in the UAE

If you are a non-resident of the UAE with real estate income in the UAE, there are a few crucial updates to be aware of regarding tax on real estate investments. The UAE Ministry of Finance has recently issued comprehensive guidelines to offer clarity on the tax obligations applicable to foreign companies and non-resident property owners in the country. These guidelines are outlined in Cabinet Decision No. 56 of 2023, specifically addressing a Non-resident Person's Nexus in the UAE in accordance with Federal Decree-Law No. 47 of 2022 concerning the Taxation of Corporations and Businesses.

Under these newly introduced regulations, non-resident entities, including foreign companies and juridical persons, will be subject to a 9 percent Corporate Tax on income derived from real estate investments in the UAE. Such income encompasses rental income, capital gains, and any other earnings resulting from property ownership. In order to fulfill their tax obligations, these entities must duly register within the country for tax purposes.

It is important to highlight that this tax framework applies to all forms of Real Estate or immovable property, regardless of its use for business purposes or as an investment, and whether it is owned directly or through non-regulated vehicles. Taxation will be conducted on a net-income basis, allowing for the deduction of relevant expenses when computing taxable income.

Exceptions and Exemptions in UAE Real Estate Taxation

However, it is crucial to note that income obtained from property owned by foreign or UAE resident individuals, whether held directly or through transparent fiscal entities like trusts, will not be subject to Corporate Tax, except when such income arises from a licensed business activity. Furthermore, certain qualifying investment funds, including real estate investment trusts, may be eligible for exemption from Corporate Tax on their income from UAE property investments, provided they meet specific conditions set forth by the authorities.

Aligning with International Standards: The Impact of UAE's Tax Laws

This regulatory update aligns the UAE's Corporate Tax laws with international standards, thereby promoting a fair and equitable playing field between domestic and foreign entities engaged in property-related income activities within the UAE. For additional insights and further details, interested parties are encouraged to refer to the official websites of the Ministry of Finance and the Federal Tax Authority, where additional clarifications will be made available.

For additional insights into this topic, consult with SFM Corporate Services for expert guidance and maximise the benefits of your real estate investments in the UAE.