The impact of corporate income tax on real estate investors in the UAE.

Property owners engaged in commercial use will face taxation. Real estate development will be recognized as a business and, therefore, will be subject to corporate tax.

New corporate taxation regime

Under the new corporate tax regime, individuals and companies actively engaged in real estate development as a business activity will be subject to a nine percent profit tax on income exceeding 375,000 dirhams. Real estate development will be recognized as a business and, therefore, will be subject to nine percent taxation on net profits exceeding 375,000 dirhams.

Taxation of rental and property ownership

There are no differences between renters and property owners; both types will be subject to corporate tax. If foreign or resident individuals own property for investment purposes, either directly or through a trust or fund that generates income from investments, they are generally not subject to corporate tax, provided that it is not owned by a corporate legal entity.

Income from real estate

Shital Soni, Partner at MI Capital Services, notes that it is important to consider that income derived from real estate is taxed in the country where the property is located. Therefore, if foreign companies and other non-resident legal entities earn income from real estate located in the UAE, that income will be subject to taxation. Regardless of the company's income, it must register in the UAE for corporate tax purposes.

Liberation of investment funds

Investment funds in real estate (REITs) are exempt from corporate income tax on income earned from investments in the UAE, provided that certain conditions are met.

Revaluation of assets

Revaluation of assets (i.e., real estate, intangible and financial assets) will become a key point for many companies that own assets but have not valued them at market value in their accounting records. Transitional provisions will allow them to choose to revalue their assets in order to avoid additional tax liabilities arising from profits/losses.