With the tax structure of the VAEs real estate that is undergoing a major change, some consequences and disruptions will follow. In the long term, however, things will relax, clarity will come to the fore and it will be things as usual. But first a look at what exactly you happened:
At the beginning of this month, the Ministry of Finance of the VAE stated that foreign and other legal persons are subject to 9% corporation tax on income earned from real estate and other real estate in the VAE. The new law was announced in December 2022 and came into force on 1 June 2023.
In view of this, all local and foreign companies will have to register within a year to prevent criminals. From the start of their first financial year, companies are subject to tax on the VAE that starts on or after 1 June 2023, with a rate of 9% on profit above AED 385,000.
The investments in real estate are earned, however, with real estate that is owned by the residents of foreign or VAE, Eithher directly or via a trust, foundation or oher-vehicles that are treated as tax-traparant, will generally not be subject to cortoate tax, offers
Moreover, there is a relief for SMEs and probably exemptions for export-oriented free zone activities. In addition, real estate investments (REITs) and other eligible investment funds can use the exemption from corporation tax on income from investments in real estate in the VAE, provided that the reluctant conditions are met. Investments in real estate by private individuals in personal capacity are also not subject to the new tax.
The law applies to real estate rights or used in a company and for investment purposes in the country. There will also be neutrality between domestic and foreign companies that earn inome from real estate. An important thing to remember is that the compliance requirements of this tax differ from that related to VAT.
The corporate income tax on Inome Dertrenid from real estate and other real estate by foreign legal Persians is in accordance with international best practices, which determine that property is taxable in the country in which they are located.
Proactive steps taken by the VAE to clarify the new structure
To understand the new tax regime, the entities concerned must receive a broader subscription of the corporation tax administration for resident and non-resident Persians in the VAE, non-artned and recorded partnerships and the treatment of family fundies and trusts. The Ministry of Finance recently held a virtual session in which all relay aspects of the new tax structure were explained.
Moreover, Dubai’s Department of Finance (DOF) has launched an integrated training program, Imtithal, to increase the awareness of the new tax. Now that the new corporation tax stated Han Ben, it is wise for VAE companies to start with the fact that they will be influenced. It will do them well to get ready for the new law rather than later.
