UAE announces rules on tax for real estate investments

UAE Ministry of Finance issues cabinet decision on corporate tax rules for real estate investment

The UAE has issued rules on whether income from real estate investments is subject to corporate tax in the country. The Ministry of Finance announced the rules in a cabinet decision, which clarifies rules on property across the United Arab Emirates. It outlines whether foreign companies and property owners based outside the country need to register investments for tax purposes.

UAE tax rules and real estate

The UAE Ministry of Finance announced the issuance of Cabinet Decision No. 56 of 2023 on a Non-resident Person’s Nexus in the UAE for the purposes of Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses.

Foreign companies and other non-resident juridical persons will be subject to Corporate Tax on income derived from real estate and other immovable property located in the UAE and will be required to register in the UAE for Corporate Tax purposes.

This applies to both immovable property that is held or used in a business and immovable property that is held for investment purposes in the UAE.

Non-resident juridical persons with immovable property in the country will be subject to Corporate Tax on a net-income basis.

This allows for relevant expenditure that meets the conditions set out in the Corporate Tax Law to be deducted when calculating taxable income.

Real estate investment income earned from immovable property owned by foreign or resident individuals, either directly or through a trust, foundation or other vehicle that is treated as fiscally transparent for Corporate Tax purposes, would generally not be subject to Corporate Tax provided it is not a licensed business activity.

Further, real estate investment trusts and other qualifying investment funds may benefit from an exemption from Corporate Tax on income derived from the investment in United Arab Emirates immovable property, provided that the relevant conditions are met.

Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said: “The Corporate Tax treatment of income derived from UAE real estate and other immovable property by foreign juridical persons is in line with international best practice which stipulates that income derived from immovable property is taxable in the country in which such property is located.

“The UAE’s Corporate Tax Law incorporates features that honour international taxation principles and ensures neutrality between domestic and foreign companies earning income from immovable property in the UAE.”

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