UAE corporate tax: Ministry clarifies tax on real estate, immovable property
Law will ensure neutrality between domestic and foreign companies earning income from immovable property in the Emirates
The UAE’s Ministry of Finance on Monday issued a clarification under which foreign companies and other non-resident juridical persons will be subject to nine per cent corporate tax on income earned from real estate and other immovable property in the UAE.
The ministry added that this law applies to both immovable property that is held or used in a business and immovable property that is held for investment purposes in the country. Real estate is one of the most important sectors of the UAE economy and a major contributor to the country’s GDP.
The UAE introduced corporate tax from June 1, 2023, and has asked all local and foreign companies to register within one year in order to avoid penalties.
The clarification comes following the issuance of Cabinet Decision No. 56 of 2023 on a non-resident Person’s Nexus in the UAE for the purposes of Federal Decree-Law No 47 of 2022.
“The corporate tax treatment of income derived from UAE real estate and other immovable property by foreign juridical persons is in line with international best practice which stipulates that income derived from immovable property is taxable in the country in which such property is located,” said Younis Haji Al Khoori, undersecretary of the Ministry of Finance
The Ministry added that corporate tax will be based on net income basis, therefore, relevant expenditure that meets the conditions set out in the corporate tax law will be deducted when calculating taxable income.
What is exempted?
However, the Ministry added that real estate investment income earned from immovable property owned by foreign or UAE resident individuals, either directly or through a trust, foundation or other vehicle that is treated as fiscally transparent would generally not be subject to corporate tax provided it is not a licensed business activity.
Moreover, real estate investment trusts and other qualifying investment funds may benefit from an exemption from corporate tax on income derived from the investment in UAE immovable property, provided that the relevant conditions are met.
Al Khoori stressed that the law will ensure neutrality between domestic and foreign companies earning income from immovable property in the UAE.
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