UAE Implements Corporate Tax on Non-Residents’ Income from Property Investments

The United Arab Emirates (UAE) Ministry of Finance (MoF) recently unveiled a significant development in its tax policies, with the issuance of a cabinet decision aimed at implementing corporate tax on non-resident entities deriving income from immovable property within the country. This decision marks a notable shift in the UAE’s taxation landscape, requiring foreign companies and other non-resident juridical persons to register for corporate tax purposes if they generate income from real estate and other immovable property located within the UAE.

According to the MoF’s official statement, this new tax regulation applies to both immovable property used for business purposes and immovable property held for investment. Younis Haji Al Khoori, the Undersecretary of the MoF, emphasized that taxing income derived from UAE real estate and immovable property by foreign entities is aligned with international standards, which stipulate that income generated from such property should be subject to taxation in the country where it is situated.

The statement clarified that non-resident individuals, whether foreign or UAE residents, will generally not be subject to corporate tax on real estate investment income earned from UAE immovable property, as long as it is not considered a licensed business activity. This exemption applies even if the property is owned directly or through entities like trusts, foundations, or other fiscally transparent vehicles for UAE corporate tax purposes.

Additionally, the MoF highlighted that Real Estate Investment Trusts (REITs) and other Qualifying Investment Funds can qualify for an exemption from corporate tax on income derived from investments in UAE immovable property, subject to meeting specific conditions.

This announcement comes at a time when the UAE has recently introduced a 9% corporate tax rate, primarily affecting large corporations. However, small and medium-sized enterprises (SMEs) are expected to receive relief, and exemptions for export-focused free zone activities are likely to be implemented.

The move to tax non-resident entities on income from UAE property investments represents a strategic step by the UAE government to align its tax framework with global best practices. This new measure aims to enhance tax compliance and ensure that income generated from immovable property within the UAE is appropriately taxed in line with international standards.

Overall, this development underscores the UAE’s commitment to maintaining a robust and transparent tax regime while aligning itself with international norms, further solidifying the country’s position as a leading destination for foreign investment and economic growth.

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