Khaleej Times, Tuesday, Jun 06, 2023 | Thul-Qidah 17, 1444
UAE corporate tax: Ministry clarifies tax on real estate, immovable property
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.