Dubai's real estate tax system boasts some particularly advantageous features. Dubai, the futuristic city of the United Arab Emirates, has become a global benchmark for investment and business, attracting entrepreneurs and investors from all over the world. This appeal is not only due to its strategic location or state-of-the-art infrastructure, but is also largely influenced by an extremely favorable tax regime.
We take a detailed look at the corporate forms available, their tax implications and the advantages they offer investors:
- Property taxation in Dubai
- Corporate forms and tax implications
- The new corporate tax
- Free zones and tax incentives
Property taxation in Dubai is a topic of great interest to investors, entrepreneurs and individuals considering investing in real estate in this city. The tax structure of the United Arab Emirates, and of Dubai in particular, offers a favorable environment that has helped make the real estate market one of the most attractive in the world. Below, we examine the main features of Dubai's real estate tax system, highlighting the aspects that make it unique.
One of the strengths of Dubai's tax system is the absence of income tax for individuals. This means that residents and investors do not have to pay tax on income generated in the country, including rental income. For businesses, until the recent announcement, Dubai levied no corporate income tax, making it extremely attractive to international and local investors. However, from June 1, 2023, a 9% corporate tax has been introduced for companies with revenues in excess of 375,000 dirhams, which remains competitive by global standards.
When it comes to property taxation, Dubai also offers advantageous conditions:
- No annual property tax: unlike many other countries, there is no annual property tax in Dubai. This means that once the property is purchased, the owner is not subject to recurring taxes based on the value of the property.
- Registration fees: registration (or transfer) fees are paid when a property is purchased. These generally amount to 4% of the property's value, plus a small administrative fee. Although these fees represent an initial expense for the buyer, they are a one-off, non-recurring charge.
- Service fees: property owners in Dubai may also be subject to annual service fees, which cover the costs of common area maintenance, security and other condominium services. These fees vary according to residential complex and area.
In Dubai, choosing the company form is a key step in setting up a new business, as it has direct implications for tax management, legal liability and the company's day-to-day operations. The city offers a wide range of company forms, each with specific features and advantages, to meet the diverse needs of entrepreneurs and investors. These corporate forms are designed to offer maximum flexibility, security and opportunities for growth in Dubai's dynamic business environment. We examine below the main corporate forms available in Dubai and their tax implications.
The LLC is one of the most common and versatile corporate forms in Dubai; ideal for a wide range of business activities. They offer limited liability to their shareholders, protecting personal assets from the company's debts or losses. One of the main features of LLCs is the requirement for a local (Emirati) shareholder to own at least 51% of the shares, although there are exceptions in free trade zones, where foreign investors can own 100% of the company. LLCs located outside free zones can operate directly in the local UAE market and gain access to a wider range of business activities.
Free zones offer two main types of business entity: the Free Zone Company (FZCO), similar to LLCs but with the option for foreign investors to own 100% of the company, and the Free Zone Establishment (FZE), which has a single owner. Both types of company benefit from significant tax advantages, such as exemption from corporate income tax, absence of import and export duties, and full repatriation of profits. They are ideal for companies engaged in international trade or offering specific services in free trade zones.
The introduction of corporate income tax in the United Arab Emirates represents a profound change in the country's tax structure. With a rate of 9% for companies with revenues in excess of 375,000 dirhams, this tax keeps Dubai in a globally competitive position. The implications of this new tax are varied, but the overall outlook remains positive, given the transparency and fiscal responsibility it introduces into the UAE tax system.
One of the most attractive aspects of taxation in Dubai is the absence of income tax for individuals, which applies to various forms of income, including income from real estate investments. In addition, there is no annual property tax, which is a considerable advantage for long-term investors. Transfer and registration fees, while present, are lower than in other jurisdictions, making property investment in Dubai an advantageous option.
Dubai's free zones are an essential part of the city's economic and commercial ecosystem, offering unique advantages to international companies and investors. Characterized by simplified regulations, tax incentives and the possibility of 100% foreign ownership, these zones attract a wide range of sectors, including trade, services, logistics, finance and, of course, real estate. Here's a detailed look at Dubai's free zones and the benefits they offer.
Free Zones are designated areas in Dubai where businesses can be 100% owned by foreign investors, in contrast to the general rule in the UAE, which requires most businesses to be owned by local nationals. Each free zone is administered by its own Free Zone Authority, which facilitates company registration, the issuance of business licenses and offers a wide range of business services.
- 100% foreign ownership: companies located in free zones can be 100% owned by foreign investors.
- Tax exemptions: companies operating in these zones enjoy exemptions from income tax, import and export duties and other taxes for up to 50 years, renewable.
- Full repatriation of profits and capital: there are no restrictions on the repatriation of profits and capital, giving investors the freedom to transfer their funds without hindrance.
- Infrastructure: free zones are equipped with state-of-the-art infrastructure, business support services, logistics and technology connections, as well as ready-to-use office and industrial space.
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