Non resident property owners in Dubai are not subject to income tax on any gains realised through the letting of their property. This only applies to non residents who have purchased their property as an individual, in their own name. Any non resident property owner, who has purchased their property through the establishment of a company name, or through their own established company, may be subject to corporation tax as the property is held through the company. To be classed as non resident in Dubai, you cannot have spent more than 183 calendar days in the country, or hold a primary residence there.
Taxes payable when purchasing a property are as follows:
These are payable by both the seller and the purchaser. The seller ordinarily pays 1% and the purchaser will also pay 1%. The transfer fees are calculated on the selling price. Depending on the transaction, other fees for setting up a lease, registering a mortgage and dividing the property, may be applicable.
At present, there is no VAT system in place in Dubai, so all property owners, resident and non resident alike, in Dubai can avail of having their property transactions VAT free. Recently, the IMF have proposed that the United Arab Emirates should introduce a VAT system, but it is not yet known if this will come into effect any time soon. Obviously, if steps are put into place to introduce such a system and it comes into force, property transactions may then be subject to VAT conditions set out by the authorities.
Ongoing taxes payable in Dubai on property are as follows:
Income Tax Plain and simpleDubai operates on a tax free policy. There are no tax offices or tax administration bodies in Dubai. For non resident property owners, this means that there will be no income tax returns to file for any rental income received, no tax rate changes and no correspondence from a foreign tax office. This no tax policy also applies to employment income earned in Dubai.
Corporate Income TaxA trade or business is subject to corporate income tax on a scale of between 0% to 50% depending on the level of profit, and also the nature of the trade or business, especially business’ set up in the ‘’free zones’’. Federal tax does not apply to general business in Dubai.
Local Property taxesA municipality tax may be applicable on annual rental payments, but it is the tenant’s obligation to pay these. Ordinarily, the tenant’s employer will cover the tax payment on their behalf. The rates vary from 5% on residential rent, and 10% on commercial rental. These rates are payable in advance annually. There may also be an annual community and waste collection tax applicable, which is charged depending on the location of the property and also the square meter of the property, at rates varying between 10 AED to 20 AED per square foot.
Other applicable taxes are as follows:
Capital Gains TaxGains Tax(CGT) is not applicable for residents and non residents alike.
Inheritance TaxNon resident property owners in Dubai who inherit property will need to re-register the property in their own name. It is essential for property owners in Dubai to ensure that a will is in place, as if there is no will (intestate) the property will be divided in accordance with Islamic law as it is in Dubai jurisdiction and will not be divided under your home countries laws. We would strongly urge you to seek independent legal advice on this matter before a will is drawn up. There are no inheritance tax obligations in Dubai.
Page added August 2010