On Monday, the Ministry of Finance in the UAE clarified under which foreign companies and non-resident juridical persons will be subjected to nine percent corporate tax on the income earned from real estate and other immovable properties.
The Ministry added that this law would apply to both immovable properties first,
- which are maintained or used in a business, and second is
- Immovable property that is held for investment purposes in the country.
Moreover, real estate is the most critical sector of the UAE economy and a significant supporter of the country’s GDP.
However, the UAE introduced a corporate tax on June 1, 2023, and has also asked all local and foreign companies to register within one year to avoid penalties.
Besides, the clarification comes after the issuance of Cabinet Decision No. 56 of 2023 on a non-resident Person’s Nexus in the UAE for Federal Decree- Law No 47 of 2022.
Younis Haji Al Khooru, the undersecretary of the Ministry of Finance, stated, ” The corporate tax treatment if income emanated from the UAE real estate and other immovable property by foreign juridical persons under control with the international best procedure and which stipulates that income derived from immovable property is taxable in the country in which such property is located.”
The Ministry added that corporate tax would be based on the net income basis, and that’s why the applicable expenses that meet the conditions set out in the corporate tax law will be deducted while calculating taxable income.
What is exempted?
The Ministry added that the real estate investment in one earned from the immovable property owned by the foreign or UAE resident individuals, directly or through trust, foundation, or another vehicle that is treated as fiscally transparent, will not be subjected to corporate tax as it is not a licensed business activity.
Moreover, the real estate investment trusts and other qualifying investment funds may be benefitted from an exemption from corporate tax on income derived from the investment in UAE immovable property under the relevant conditions.
Al Khoori also stressed that the law would ensure neutrality between domestic and foreign companies earning income from immovable property in the UAE.
