Are Real Estate Taxes Imposed In The UAE

Are Real Estate Taxes Imposed In The UAE

The UAE is famous for its tax-friendly system. Consequently, the UAE became an attractive hub for investments, especially real estate investment. The government offers foreign property owners and investors tax advantages and exemptions. In this blog, we will walk you through the full taxation system of the UAE.

Are real estate taxes imposed in the UAE?

The simple answer is NO. As friendly as it gets, the tax system in the UAE does not impose annual taxes on real estate as most countries do. Moreover, selling a property in Dubai for profit is also exempted from any capital gain taxes, so the investors retain a full profit.

Check also: Properties For Sale in Dubai With Casttio 

Fees and charges for property transactions:

Nevertheless, there are some fees and charges that still apply in the case of property ownership or transactions. They are mostly applied once and they differ according to the place and the type of property. Let’s dig in.

Property registration fees:

Also known as the “transfer fees”; when the contract is finalised, this fee has to be paid once to the DLD. The property registration fee is 4% of the property value in Dubai and 2% in Abu Dhabi.

Check also: Properties For Sale in Abu Dhabi With Casttio

Value Added Tax (VAT):

All residential properties are exempted from VAT in sales and leases. On the other hand, commercial properties are subjected to a VAT of 5% in sales and leases.

Service charge:

Owners of real estate in the freehold areas pay an annual service charge for maintenance and upkeep of the facilities. The value differs according to the location and property type.

Municipality fees:

Also known as “Housing Fees”; this fee is calculated as a percentage of the average annual rent of the area. This percentage is usually 5% and it is billed monthly.

Additional fees:

  • The real estate agent/agency commission
  • The No Objection Certificate (NOC) fee
  • The Mortgage fees

Other provisions of the UAE taxation system:

This tax-friendly environment extends to involve other aspects of taxes. This includes income tax, capital gain tax, wealth tax, inheritance tax, and rental tax.

Income tax:

The UAE does not impose taxes on personal income from real estate investments or other sources of income. So, property owners get to keep the full rental income they earn.

Capital gain tax:

Another exemption in the UAE tax system is the capital gain tax. You won’t pay any taxes in case of property sales. The UAE does not impose net worth tax or estate and gift tax.

Wealth tax:

In the UAE, wealth remains untaxed. Residents keep full control over all types of wealth including real estate without paying recurring wealth taxes. Net worth and individual wealth are exempted from taxes.

Check also: Villas For Sale in The UAE with Casttio

Inheritance tax:

There is no inheritance tax in the UAE; properties can be passed down to heirs smoothly and without any tax implications.  

Rental taxes:

Any real estate investor must pay an annual rental tax that is still relatively low. The rental taxes differ according to the location of the property. In Dubai, the rental tax is 5% of the annual lease value. In Abu Dhabi, the rental tax drops to 3% of the annual lease value and in Sharjah it is only 2%.

Check also: Properties For Sale In Sharjah With Casttio

FAQs about taxes imposed in the UAE:

Do people living in the UAE pay taxes?

The UAE doesn’t impose individual income taxes or real estate taxes. However, they pay VAT and rental taxes.

Are real estate taxes imposed in the UAE?

No. However, other fees and charges apply such as transfer fees, service charges, housing fees and VAT.

Do taxes have a fixed value?

No. Taxes differ according to the property type and location. For instance, rental tax is 5% of the annual rental value in Dubai, 3% in Abu Dhabi and 2% in Sharjah.

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