UAE Corporate Tax Real Estate Obligations

14 May, 2024 / Haroon Juma / Corporate Tax

Corporate Tax Guide

With introduction of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses the UAE ushered in a significant changes in the tax landscape including the real estate sector. 

The first draft of the corporate tax law was initially silent on many aspects of the real estate businesses. However, Cabinet Decision No. (49) of 2023 has clarified the taxation of revenue deriving from real estate for companies and individuals.  

Property Held By A Natural Person 

A natural person owning property in the UAE may be subject to taxation under the provisions of Cabinet Decision No. 49 of 2023 if the activity is related to any licensed commercial activity.  

Pursuant to this decision, businesses or business activity of a natural person, whether resident or a non-resident, is subject to corporate tax in the event the turnover generated from such activities exceeds AED 1M within a calendar year.  

However, if the activity of the natural person is investement activity that can be conducted without a commercial license relating to (directly or indirectly) the sale, leasing, sub-leasing, and renting of the real estate, the income from such activity is non-taxable. Taxpayers should note if the activity requires a license, such as the management of real estate, then the income is subject to corporate tax with the application of the above threshold of AED 1M.  

Tax Treatment of Property Held By a Company 

For a company that owns real estate, there are three categories of property that are subject to different forms of treatment:  

  • Non-commercial property 
  • Commercial property inside a free zone 
  • Commercial property outside a free zone (on the ‘mainland’) 

Non-commercial properties  

Includes real estate that is used non-exclusively as a place of residence or accommodation including hotels, motels, bed and breakfast establishments, serviced apartments and the like, the income attributable to such property will be subject to corporate tax at 9% as a rule. 

Commercial property inside a free zone 

Commercial property in the free zone is different for owners that have the status of a Qualifying Free Zone Person (QFZP) to those that are treated as typical taxpayers. If the owner has the status of the QFZP (as explained in article (Free Zone QFZP) and the other transacting party is also established in the Free Zone, then income sourced from such activity will be considered as the Qualifying Income subject to corporate tax at 0%.  

Commercial Property Outside a Free Zone (‘mainland’) 

If transacting party is established outside the Free Zone, or the owner does not meet conditions for the QFZP (or made an election to be a regular taxpayer), the income sourced from the commercial property located in the Free Zone will be subject to corporate tax at 9%. 

Summary Guide 

Type of OwnerStatus of OwnerLocation of PropertyType of PropertyTax Treatment
Juridical PersonNon-ResidentMainlandCommercialTaxable @9%
Non- CommercialTaxable @9%
Free ZoneCommercialTaxable @9%
Non- CommercialTaxable @9%
ResidentMainlandCommercialTaxable @9%
Non- CommercialTaxable @9%
Free ZoneCommercialTaxable @0%*
Taxable @9%
Non- CommercialTaxable @9%
Juridical PersonNon-ResidentMainlandCommercialPredominantly
Non- CommercialNon-taxable**
Free ZoneCommercialPredominantly
Non- CommercialNon-taxable**
ResidentMainlandCommercialPredominantly
Non- CommercialNon-taxable**
Free ZoneCommercialPredominantly
Non- CommercialNon-taxable**

Conclusion 

The Cabinet Decision provides welcome clarity on rules governing real estate under UAE Corporate Tax. Tax payers are advised to ensure their tax model and obligations are properly managed and optimised to meet the legislation. If you require any assistance, we provide complete assistance to ensure your obligations are fully discharged under the law. 

 Accounting & Tax Services 

As an approved FTA Tax Agency, SimplySolved supports businesses under advisory or complete outsource basis to optimise, manage and discharge tax obligation in the UAE. Our experts possess in-depth knowledge of the UAE tax regulations and can guide you through the intricacies of the UAE Corporate Tax Law 

By leveraging our expertise, you can streamline the process, saving time and minimizing the risk of errors. This proactive approach ensures that your Tax matter are handled efficiently, allowing you to focus on your core business activities. 

Simply Solvedis an ISO 9001 & 27001 certified company and a registered FTA Tax Agency.  Our team of experienced consultants and tax agents provides high-quality, cost-effective services for all Tax matters for companies of all sizes. 

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