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DUBAI: The UAE Ministry of Finance has announced a Cabinet decision on relations of non-resident persons in the UAE.
According to the decision, foreign companies and other overseas legal entities (non-resident legal persons) will be subject to UAE corporate tax on income earned from real estate located in the UAE. This applies to real property held or used in a business and real property held in the UAE for investment purposes.
Non-resident legal persons who own immovable property in the UAE will be subject to corporate tax on net income. Relevant expenditures that meet the conditions stipulated in the enterprise tax law can be deducted when calculating taxable income.
“The corporate tax treatment of income derived by foreign legal persons from UAE real estate and other immovable property is in line with international best practice, which provides that income derived from immovable property is taxed in the country where such property is located,” said Younis Haji Al Khoori, Deputy Finance Minister. “The UAE’s corporate tax law incorporates features that respect international tax principles and ensure neutrality between domestic and foreign companies that earn income from immovable properties in the UAE.”
Real estate investment income earned from UAE immovable property personally owned by a foreign or UAE resident, whether directly or through a trust, foundation or other vehicle considered fiscally transparent for UAE corporate tax purposes, is generally not subject to corporate tax business activities. In addition, REITs and other qualified investment funds are exempt from corporate tax on income derived from investment in real estate in the UAE, provided the relevant conditions are met.
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