Tax on real estate income in the UAE for non-residents
The UAE Ministry of Finance regularly updates laws and regulations regarding corporate tax to ensure transparency among stakeholders. Last year, it was announced that non-residents will be required to pay a tax on real estate income in the UAE. Read further to gain a comprehensive understanding of the matter.
TAX ON REAL ESTATE INCOME IN THE UAE – HOW DOES IT WORK?
The regulations for non-resident real estate tax is governed by Cabinet Decision No. 56 of 2023 for Federal Decree-Law No 47 of 2022. As per this announcement, foreign companies and non-resident juridical persons will have to give a 9% tax on any income generated from real estate and any other immovable property in the country. This could include any such property being held as an investment or used in the business.
The corporate tax will be based on the net income. Hence, relevant expenses can be deducted when calculating taxable income if the conditions set out in corporate tax law are met.
The Ministry of Finance today has announced the issuance of Cabinet Decision No. 56 of 2023 on a Non-resident Person’s Nexus in the UAE for the purposes of Corporate Tax.
The decision is in line with international best practice, ensuring neutrality and equity between domestic… pic.twitter.com/wT8A2x9Zdv
— وزارة المالية | الإمارات (@MOFUAE) June 6, 2023
EXEMPTIONS
When announcing the tax on real estate income, the UAE Ministry of Finance also clarified exemptions. Any real estate income from property owned by foreign or UAE residents is not taxed if it’s not part of a licensed business activity, regardless of whether the ownership is direct or through a trust or foundation.
Additionally, real estate investment trusts and other qualifying investment funds can be exempt from corporate tax on income from UAE property if they meet certain conditions.
WHAT ARE THEY SAYING?
His Excellency Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said this about the non residents tax on income from real estate in the UAE:
“The corporate tax treatment of income derived from the 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.”
FAQS ABOUT THE TAX ON REAL ESTATE INCOME IN THE UAE
WHERE CAN I READ MORE ABOUT CORPORATE TAX IN THE UAE?
The UAE government implemented the federal corporate tax law on 1st June 2023. Check out the comprehensive UAE corporate tax guide to understand how it applies to your businesses. Furthermore, you can read about other taxes in the UAE to get further clarity.
IS IT MANDATORY FOR COMPANIES TO ALIGN THEIR FINANCIAL YEAR TO THE FISCAL TAX YEAR?
It is not mandatory. Nevertheless, many corporates are likely to voluntarily change it and align their operations with the new tax year. This would help in matters related to tax on real estate income in the UAE for non residents.
WHAT ARE THE RULES FOR FOREIGNERS BUYING PROPERTY IN THE COUNTRY?
To get all the pertinent answers, read our guide on rules for foreigners buying property in the UAE.
WHAT IS THE TAX RATE FOR NON RESIDENT IN TAX?
While there is no direct income tax, as discussed, a 9% tax on any income generated from real estate and any other immovable property in the country.
IS THERE REAL ESTATE TAX IN THE UAE?
As discussed, there is a 9% tax from real estate income for non-residents. While others have to give 4% transfer fee.
This concludes our overview of the tax on income from real estate in the UAE for non-residents. The introduction of this tax is allied with the country’s long-term goals and the objectives of the UAE corporate tax. It must be noted that the rate for corporate tax in the UAE is the lowest in the GCC region.
Tax on income from real estate in the UAE for non residents will be used for the betterment of residents and citizens of the country.
Keep following MyBayut to learn about the rules and regulations in the UAE.
Disclaimer: For further information and clarification about the Corporate Tax Law, please contact the UAE Ministry of Finance and the Federal Tax Authority.
