The United Arab Emirates (UAE) recently implemented its federal Corporate Tax Dubai (CT) system, with potentially significant implications on real estate market in UAE. This blog aims to give an in-depth account of how corporate tax UAE is applied in the UAE real estate market while outlining key features of corporate tax guide. You will also learn how the corporate tax consultants in the UAE are beneficial for providing corporate tax services.  

Tax Overview in the UAE 

Starting June 1st, 2023, the UAE Ministry of Finance implemented federal corporate tax. The corporate tax regime applies to various real estate related businesses including real development, management brokerage agencies and construction. Tax rates include as follows: 

• 0% for income AED 375,000 or less 

• 9% for income AED 375,000 or more 

Taxable Income and Real Estate Investments 

Taxable income is defined as any revenue remaining after deducting all costs allowed under local taxation law and any expenses allowed according to this country’s legislation for taxation. All commercial activity conducted on UAE mainland with trade or commercial license or permit terms subject to corporate tax; thus, any earnings from real estate purchases such as capital gains realized from sales of property, or Real Estate Investments Trusts (REITs) earnings are tax-deductible according to this new corporate tax system. 

Real Estate Investment Trusts REITs and Corporation Tax 

Investors commonly utilize REITs as part of their real property investment portfolio. REITs are companies which manage, own and finance assets that generate income such as apartments, stores and buildings. Typically, they do not count towards tax laws of UAE corporate tax law for individuals; however, there are currently unclear rules concerning corporate entities. 

Corporate Tax and Real Estate Development and Building  

Companies operating in the UAE’s construction industry must pay corporate tax. Companies operating exclusively within zone exemptions do not incur corporate tax. Furthermore, organizations providing brokerage and consulting services as well as construction are taxed as corporate. Finally, real estate firms that offer clients services like purchase/sale/planning incur taxes as corporates as well. 

Transfer Tax and Real Estate Transactions 

Corporate tax does not apply to buyers or sellers of real property; however, transfer tax applies to any transaction for both corporations and individuals regarding real estate transactions. In Dubai, for instance, government imposes an equal split 4% transfer tax between buyer and seller when making real estate transfers in Dubai; corporations however are subject to corporate taxes imposed when conducting their businesses on land in UAE mainland. 

Long-Term Impact of Real Estate Market 

The new rules will enable companies to operate more transparently, leading to improved credit access and lower capital expenditure. Demand for residential properties should remain steady as builders pass savings onto customers by slightly increasing prices; this may have significant ramifications for both industrial and retail sectors as retail companies could struggle to pay rent and maintain profitability; investment could also decrease, which may impact space requirements going forward. 

Conclusion 

The real estate industry, as with other industries, is because of corporate taxes. The main point to note is that if a company is located within an UAE on the mainland, then it is tax-exempt. However, the business that is situated in a free zone is exempt. For corporations, all forms of income that is derived from real estate businesses is tax-deductible; however, those who do not have trade licenses aren’t liable for any kind of real estate earnings. Corporate tax consultant in Dubai is an asset for your real estate in terms of corporate tax. ebs Chartered Accountants are one of the top consultants in Dubai. They are a team of professional experts available for your business in times of need. Since corporate tax is a new law, it is crucial that you consider professional help. ebs will make sure your business is following all Federal Tax Authority (FTA) rules and regulations and there are no fines or penalties on your business.  

FAQs  

Are there any specific tax regulations for real estate companies in the UAE? 

While there is no corporate tax on real estate income, certain fees and taxes may apply, such as municipality fees, property registration fees, and value-added tax (VAT) on certain transactions. 

How does the absence of corporate tax benefit the real estate sector in the UAE? 

The absence of corporate tax encourages investment in the UAE’s real estate sector by providing a favorable tax environment for businesses. This promotes economic growth, stimulates development, and attracts both domestic and foreign investors.