The ability to invest in property depends on the class of person/entity and location of the property.
UAE nationals are individuals possessing UAE nationality and companies and establishments wholly owned by them.
UAE nationals can hold any land interest anywhere in Abu Dhabi.
The same rights are held by:
GCC nationals are nationals of the member countries of the Gulf Co-operation Council, which are the Persian Gulf states of:
and corporate entities wholly owned by them.
GCC nationals can hold any land interest within designated investment areas in Abu Dhabi.
Foreigners can hold the following land interests within 'designated investment areas' only:
Also 'individuals, companies and parties to be specified by a decision by the Executive Council', can be afforded the same status as nationals for the purpose of the owning real estate. The Executive Council has so far only issued such decisions in respect of Sorouh Properties PJSC and Aldar Properties PJSC, thereby allowing them to hold land interests throughout Abu Dhabi notwithstanding that they have an element of foreign ownership.
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Apart from VAT, there are currently no additional taxes charged in the United Arab Emirates.
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The United Arab Emirates introduced a VAT regime on 1 January 2018. From 1 January 2018, the sale of real estate by businesses which are registered for VAT is subject to the following VAT rates:
A special payment procedure may be applicable with the sale of certain commercial real estate by any supplier other than the developer of the property. If this procedure is applicable, the buyer of the real estate must pay the VAT directly to the Federal Tax Authorities (FTA) instead of to the supplier.
Once the payment of the VAT has been made to the FTA, the buyer will receive a Payment Transaction Number. The buyer will be required to produce the Payment Transaction Number to the Land Department in order to process the ownership transfer of the commercial real estate.
In the case of investment properties, the transaction may be treated as the “transfer of a going concern” which is not deemed a supply and is considered out of the scope of VAT. The conditions for obtaining this treatment could be complex and require appropriate legal analysis.
Whether VAT can be recovered by the buyer will generally depend upon the use of the property. If and to the extent the buyer is using the property to generate taxable supplies (eg charging VAT on rents) then the VAT can in principle be recovered. If the real estate is used for VAT exempt activities, the VAT may not be recoverable. Special input tax apportionment methods for determination of VAT recovery percentage may be available (eg floorspace method), subject to conditions.
The buyer should take advice as change of use of the property could give rise to adjustments. If the VAT paid (input VAT) exceeds the VAT for which the buyer has to account for (output VAT) there may be a delay before the recoverable VAT is repaid by the Federal Tax Authority.
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These could include:
These are payable to the Land Registration Department of the Abu Dhabi Municipality.
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None.
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This could comprise:
In addition, leases are required to be registered in a new register maintained by the ADM pursuant to a new system known as Tawtheeq. The following fees are payable by the landlord under this system:
Leases of four years and over are to be registered under the alternate register maintained by the ADM known as Tamleeq. The rules and process to registration are yet to be formally established. There are two different registration fees payable depending on the term of the lease:
Responsibility for the registration fees can be provided for in the lease.
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Rental income, capital gains (upon divestment).
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The UAE has introduced Corporate Income Tax (CIT) for financial years starting on or after 1 June 2023.
Under the new CIT regime, income from immovable property, whether derived from sale or through leasing, will typically be subject to a 9% tax rate for ‘regular taxpayers’ who are subject to the standard tax regime (taxable income up to AED 375,000 is taxed at 0%).
Under the CIT’s Free Zone tax regime, entities that are considered Qualifying Free Zone Persons (QFZPs) are eligible for a 0% CIT rate on certain types of income (i.e. qualifying income), provided specific criteria are met. The regulations with respect to the Free Zone tax regime are relatively complex, but in essence, in a real estate context, only income from commercial properties located in the Free Zone may qualify for the 0% rate, provided the transaction is conducted with an entity registered within a Free Zone (i.e. a Free Zone Person). Conversely, revenue from residential properties does not qualify for the 0% rate. It is important to note that properties such as hotels, motels, bed and breakfasts, serviced apartments, and similar establishments are not categorized as commercial properties for the purposes of the Free Zone tax regime.
Individuals who conduct a business or business activity in the UAE will also be subject to CIT if their turnover exceeds AED 1 million within a calendar year. However, income that individuals earn from real estate investments including profits from selling, leasing, sub-leasing, or renting out land or property is exempt from CIT. This exemption applies provided these activities do not require a (business or trade) license or are not conducted through a license. Additionally, this type of real estate income does not count towards the AED 1 million threshold that determines CIT liability for individuals.
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Domestic dividends and other profit distributions earned from UAE juridical persons are not subject to withholding tax and exempt from UAE CIT in respect of the recipient. Dividends paid by a UAE juridical person to a foreign shareholder qualify as UAE sourced income and are subject to UAE withholding tax for which the current rate is set at 0%.
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The fees of agents, lawyers and other professional advisors are likely to be payable in connection with the ongoing management of the relevant property.
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No.
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See sections on other costs of acquisition and taxation of income.
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No additional taxes apply. However, transaction‑related costs such as agency fees, legal fees and mortgage release fees may be incurred.
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What taxes are payable in relation to the purchase of real estate via the various types of corporate vehicle available and who is responsible for the payment of these taxes?
Apart from VAT, there are currently no additional taxes charged in the United Arab Emirates.
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