Corporate Tax Law, UAE vide Federal Law No. 47/2022 will be enforceable on taxable income of both resident and nonresident persons in real estate business under commercial and trade licenses. The UAE corporate tax rate is zero percent for a gain of up to 375,000 or less and nine percent for 375,000 or more. Therefore, it is advisable for real estate businesses to avail the expert services of UAE tax consultants to seamlessly implement the UAE corporate tax.
The separate entity of the Company
The treatment of the corporate tax statute for companies and individual is separate. All transactions in real estate made by an individual are exempted from corporate tax but the transactions done by the company are subject to taxation.
Mainland and Free Zone Real Estate
Real estate business activities such as sale, purchase, and planning and facilitation for customers in the UAE’s mainland are subject to corporate taxation, on the other hand, real estate business activities conducted in free zones are exempted from corporate tax if they are qualified exempted persons.
Personal Investment in Real Estate
Individuals who have invested in real estate for their own account are not subject to corporate tax. Private individuals make a profit from real estate without getting a trade license. Therefore, all income from real estate, such as capital gains, profits, shares obtained by the sale of real estate, or income from real estate transactions is not taxed.
REITs (Real Estate Investment Trusts) under Corporate Tax UAE
REITs (Real Estate Investment Trusts) are used by businessmen/investors investing in real estate as business activities. REITs (Real Estate Investment Trusts) are corporate bodies working through assets by producing financial income such as buildings, apartments, or lands. These companies allow investors to invest in diversified portfolios of land and buildings and receive a share of the rental income from these assets. Investors buy REITs in the form of stocks or stocks.
Construction and Development of Real Estate and Corporate Tax
Construction companies in the UAE are subject to corporate income tax. In addition, agencies and corporate bodies that provide brokerage, consulting, and construction services are subject to corporate income tax. Similarly, the government levies taxes on real estate agencies that offer services like planning, purchasing, selling, and facilitating sales/purchases to their clients.
Corporate income tax and transactions of real estate
As earlier stated Corporate Tax does not apply to persons buying or selling real estate but all real estate transactions are subject to transfer tax regardless of the corporate bodies or individuals.
Read more: What expenses are deductible under UAE corporate tax?
Corporate Tax on Real Estate in Dubai
For all real estate transactions with a four cent (4%) transfer tax imposed in Dubai by the government, which is equally shared between the seller and buyer. On the other hand, corporations must pay corporate income tax when selling or buying real estate if the business occurs in the UAE mainland. The rate and limit are the same as other companies. According to the different Financial Center reports the new corporate law system will allow companies to do business more conveniently and transparently.
Consult UAE Tax Consultants
The implementation of corporate tax on real estate businesses in the United Arab Emirates is a new phenomenon to companies, thus it might be a complex task to implement it and stay compliant with the Federal Tax Authority’s regulations and standards. Therefore, it is highly advisable for UAE real estate businesses to consult top tax consultants in Dubai to stay compliant and to avert fines for noncompliance. So, contact us today and we shall be happy to assist you.
Mohammad Alkhatim
Mohammad is a qualified Legal Consultant with over 5 years of experience gained in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He has vast experience in reviewing and drafting tax documents. Mohammad has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and offers professional investigations to underlining tax complexities.