With the implementation of Federal Decree-Law No. 47 of 2022, the corporate tax landscape in the UAE has undergone significant transformations, particularly affecting the real estate industry. This legislation, which governs taxation for corporations and businesses, introduced fresh regulations specifically targeting individuals and companies involved in real estate transactions. Initially, certain elements related to real estate operations were not addressed by the corporate tax law. However, Cabinet Decision No. (49) of 2023 has provided essential clarification on how revenue from real estate activities will be taxed.
Natural Persons’ Taxes on Real Estate
Real estate owners often wonder whether their activities will be taxed under UAE corporate tax laws. In accordance with Cabinet Decision No. (49) of 2023, natural persons may be subject to corporate tax if they engage in a licensed real estate commercial activity, such as property management.
The law requires corporations to pay corporate tax if revenue generated from such commercial activities exceeds AED 1 million in a calendar year. A natural person’s income from real estate activity that is purely investment-related and does not require a commercial license—such as leasing, renting, or selling—is not taxable. If the AED 1 million threshold is exceeded, managing a property would require a commercial license and would be taxable..
Corporate Tax Treatment of Real Estate
Corporate tax regulations differ for companies that own real estate. They depend on the type of property and its location.
Non-Commercial Properties
Generally, non-commercial properties, such as hotels, serviced apartments, etc., are subject to corporate tax at 9%.
Commercial Properties in Free Zones
It is important for companies that own commercial properties in UAE free zones to consider certain factors. A company that qualifies as a Free Zone Person (QFZP) and conducts its real estate transactions within the free zone pays no corporate taxes on these transactions. If, however, the company is not a QFZP or deals with entities outside the free zone, income from these properties will be taxed at 9%.
Commercial Properties Outside Free Zones (Mainland)
Commercial properties located on the mainland, which are referred to as “mainland” properties, are subject to corporate tax at the standard rate of 9%.
Key Considerations for Juridical Persons
According to their residency status and property type, judicial persons (companies or entities recognized by law as having a legal identity separate from their owners) are subject to specific tax obligations:
- Non-Resident Juridical Persons: The tax rate on commercial and non-commercial properties located on the mainland is 9% for non-resident juridical persons.
- Resident Juridical Persons: If a company meets the qualifying conditions for QFZP status, then free zone commercial properties can benefit from the 0% tax rate.
Summary Guide for UAE Real Estate Corporate Tax
A simplified view of tax treatments for various ownership scenarios in the UAE real estate market can be found in the following table:
| Type of Owner | Location of Property | Type of Property | Tax Treatment |
| Natural Person (Non-Resident) | Mainland | Commercial | Taxable @9% |
| Natural Person (Non-Resident) | Free Zone | Commercial | Taxable @9% |
| Natural Person (Resident) | Mainland | Commercial | Taxable @9% |
| Juridical Person (Non-Resident) | Mainland | Commercial | Non-Taxable** |
| Juridical Person (Resident) | Free Zone | Commercial | Taxable @0%* |
Conclusion
In accordance with Emirates corporate tax law, Cabinet Decision No. (49) of 2023 clarifies the taxation of real estate in the UAE. It is important for real estate owners, whether individuals or companies, to carefully assess their activities and comply with applicable regulations in order to avoid penalties. Companies with complex real estate portfolios need a strategic approach to managing tax obligations.
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