The introduction of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses marked a considerable shift within the UAE’s tax landscape, with the real-estate sector being especially impacted. While the preliminary draft of the UAE corporate tax law left many factors of real-estate businesses unclear, Cabinet Decision No. (49) of 2023 has since clarified the taxation of revenue derived from real-estate for both businesses and individuals.
Tax Treatment for Natural Persons Owning Property
Under Cabinet Decision No. 49 of 2023, a natural person proudly owning property within the UAE can be subject to corporate tax if their interest is associated with an authorized/licensed industrial interest and generates a turnover exceeding AED 1 million inside a calendar year. However, if the activity is an investment activity that does not require an industrial license such as sale, leasing, or renting of real-estate, the income from such activity is non-taxable. It’s vital to observe that if the activity requires a license, together with real-estate management, the income is subject to corporate tax if the AED 1 million threshold is met.
Tax Treatment for Companies Owning Property
For businesses owning real-estate, the tax treatment varies depending on the type of assets:
- Non-industrial properties: This consists of properties used as residences or accommodations such as hotels, motels, and serviced apartments. Income from those properties is usually subject to corporate tax at a charge of 9%.
- Commercial property inside a free-zone: The tax treatment differs for owners with Qualifying Free Zone Person (QFZP) status and people without. If the owner is a QFZP and the transacting party is likewise within the free-zone, the income is considered Qualifying Income and is subject to corporate tax at 0%.
- Commercial property outside are a free-zone (mainland): If the transacting party is outdoors, the free-zone or the owner would not meet the QFZP situations; the income from the industrial property are subject to corporate tax at 9%.
Summary of Tax Treatment
| Type of Owner | Status of Owner | Location of Property | Type of Property | Tax Treatment |
| Juridical Person | Non-Resident | Mainland | Commercial | Taxable @9% |
| Non-Commercial | Taxable @9% | |||
| Free Zone | Commercial | Taxable @9% | ||
| Non-Commercial | Taxable @9% | |||
| Resident | Mainland | Commercial | Taxable @9% | |
| Non-Commercial | Taxable @9% | |||
| Free Zone | Commercial | Taxable @0%* | ||
| Taxable @9% | ||||
| Non-Commercial | Taxable @9% | |||
| Juridical Person | Non-Resident | Mainland | Commercial | Predominantly |
| Non-Commercial | Non-taxable** | |||
| Free Zone | Commercial | Predominantly | ||
| Non-Commercial | Non-taxable** | |||
| Resident | Mainland | Commercial | Predominantly | |
| Non-Commercial | Non-taxable** | |||
| Free Zone | Commercial | Predominantly | ||
| Non-Commercial | Non-taxable** |
*If conditions for QFZP are met.
**If conditions are met.
Conclusion
Cabinet Decision No.49 of 2023 gives much-needed understanding about the policies governing real-estate tax in UAE under UAE Corporate Tax. Taxpayers should ensure their tax model and responsibilities are properly managed and optimized to comply with the legislation. Seeking expert help can assist in navigating the complexities of the Corporate Tax real estate UAE and ensure complete compliance.
How Corporate Tax consultant can Assist?
Corporate tax consultants play a critical role in assisting businesses to navigate the complexities of UAE corporate tax regulations. Their information guarantees accurate compliance with evolving laws, minimizing risks and avoiding penalties. They help in tax planning, optimizing liabilities through valid deductions and exemptions, and streamlining the submitting process. They additionally offer tailor-made techniques for numerous commercial enterprise structures, provide illustration in the course of audits, and make sure timely submissions of tax returns. By leveraging their specialized knowledge, businesses can pay attention to the boom whilst preserving economic performance and adherence to legal requirements.
FAQs
What is the UAE corporate tax on real estate?
It’s a tax on income derived from real estate activities, including property revenue and rentals.
Are there any exemptions for real estate businesses?
Certain exemptions apply, such as for qualifying entities involved in specific real estate activities.
How does corporate tax impact real estate development?
It affects profitability and could impact the financial structure of real estate developments.
When do businesses need to comply with the corporate tax regulations?
Businesses must comply with the regulations starting from the tax year in which they are applicable.