The United Arab Emirates (UAE) has introduced new rules on taxing income from real estate investments. These rules were announced by the Ministry of Finance in a cabinet decision to provide clarity on property regulations in the UAE.
According to the rules, foreign companies and property owners from outside the country must register their investments for tax purposes in UAE. Foreign companies (also called non-resident juridical persons) must pay corporate tax on income made from real estate and other immovable property in UAE. They must also register for corporate tax.
The rules apply to immovable property used in business as well as property held as investments. Foreign companies owning property in the country will be subject to corporate tax based on their net income. They can subtract eligible expenses from their taxable income if they meet the conditions mentioned in the corporate tax law when calculating taxable income.
Income from real estate investments by foreign or resident individuals, either on their own or through trusts, foundations, or other transparent ways that are transparent for corporate tax purposes, is generally not subject to corporate tax unless it is part of a licensed business activity.
Some investment organizations, like real estate investment trusts and investment funds, may be exempt from corporate tax on income made from their investments in UAE property, provided they meet specific conditions.
Younis Haji Al Khoori, the Undersecretary of the Ministry of Finance, explained that the taxation of income from UAE real estate and other immovable property by foreign juridical persons aligns with international best practices.
It is recognized globally that income from immovable property should be taxed. The UAE’s corporate tax law adheres to these principles and ensures fairness for both domestic and foreign companies earning income from real estate.