REALWorld Law

Sale and purchase

Taxation of asset deals

Which taxes are relevant/which transaction costs will be incurred when buying real estate as an asset (asset deal) and how are the transaction costs shared between the buyer and seller?

United Arab Emirates - Dubai

United Arab Emirates - Dubai

VAT is applicable in the United Arab Emirates from 1 January 2018 and the following rates apply:

  • Sale of commercial real estate – 5% (standard rate)
  • First sale of new residential property (within 3 years of completion) – 0% (zero rated)
  • Subsequent sale of existing property – exempt (no VAT)

In the case of investment properties, the transaction may be treated as the ‘transfer of a going concern’ which does not attract VAT. The conditions for obtaining this treatment are complex and advice should be sought.

To register a transaction at the Dubai Land Department (DLD) certain fees apply.

For a sale and purchase, the registration fee is 4% of the purchase price, to be split equally between the seller and the buyer unless otherwise agreed. It is common practice for the seller to insist on the buyer paying the full 4% to the DLD. If the buyer is granting a mortgage over the property to a bank, the mortgage must also be registered and the registration fee is 0.25% of the mortgage amount, up to a maximum of AED 1,500,000.

For long term leases, the registration fee is 4% of the total value of the contract. For musatahas (rights to use and exploit land belonging to another person, along with the right to build on that land) the registration fee is 1 percent of the value of the contract.

Please note that the above fees are correct as at 1 September 2018. The DLD website can be checked for up-to-date details on fees.

In addition, there may also be agents' fees, surveyors' fees, lawyers' fees, architects' fees (for plans used to obtain a building permit) etc.