If you are browsing flats for sale in the UAE, looking for a buy-to-live or buy-to-let option, you might be wondering what taxes a property purchase involves. 

The UAE legislation is associated with Islamic law. It does not recognize practically any type of taxes that are customary for other states.

The UAE has a favorable business environment. To a large extent, this is achieved due to the taxation system which is advantageous for foreign investors and expats. 

The amount of financial flow that regularly comes from abroad is several times higher than that of most Asian and European countries.

Types of UAE taxes

The UAE does not have a single law governing the tax system. Each emirate and free economic zones have separate regulations.

Taxation is formed according to a simplified system. Many types of taxes, which are in other developed countries, are not present here. This stems from religion. There is not a word about taxes in the scriptures of Islam.

Tax rates in the UAE

There is no corporate tax in the country. However, in some free economic zones it is payable. Legal entities do not need to pay this fee for the first 15 years after launching a company. This period can be extended for another 15 years.

Trade license tax is 10% of the value of all rented premises of the company and 5% of the employees’ living expenses. Income tax and license are paid once a year. The UAE has agreements with other countries for the avoidance of double taxation.

Taxes for individuals

UAE citizens are exempt from paying taxes. The absence of tax payments from individuals is compensated for by other fees for the country’s budget.

Residents of the emirates are charged fees for service in restaurants and hotels (from 10% to 20% of the service cost), for residential property rent (5% of the annual cost), for the purchase of real estate (4% for the buyer, 0% for the seller), for travel and some other services.

Real estate taxes

Owners of real estate in the Emirates, regardless of their citizenship, are exempt from taxes.

The buyer and the seller pay the tax in equal shares. The sale of real estate is taxed in the same amount, but its payment is not divided equally between the parties to the transaction. 2/3 of the amount is paid by the buyer, the rest is paid by the seller. There are no taxes for renting out a property.

VAT 

In 2018, the UAE introduced VAT at a rate of 5%. This was due to a decrease in oil revenues. The minimum interest rate for value added tax will have almost no effect on the income of the country’s citizens.

VAT refund

In the UAE, VAT is refunded only to guests of the country. The measure is aimed at boosting a tourist flow, which annually replenishes the state treasury by a decent amount.

In the near future, tourists will be able to claim back VAT right in the country’s airports. Designated refund points will be installed at the airport terminals where eligible foreign tourists will be able to carry out the entire procedure on their own.

Benefits of tax residency in the UAE

• no income tax
• banking secrecy (local and foreign) and financial privacy 
• preferential withdrawal of dividends and interest
• avoidance of double taxation 

Tax residency can be obtained by a foreigner who actually stays in the country for more than 183 days a year. The certificate can be issued through starting a business in a free economic zone, being a hired by such a company or through the purchase of real estate.

To obtain tax residency, a legal entity must be registered in the UAE for at least 1 year.

To register the status, you must submit the following documents to the Ministry of Finance:

• residence visa
• international passport
• Emirates ID
• a long-term lease agreement (from 1 year) or a certificate confirming the ownership of property in the UAE
• 6 -months bank statement
• information about wages

One-stop UAE real estate portal  

You can find out more information about real estate in Dubai and about prices for apartments in the UAE on the Emirates.Estate portal. Experienced specialists will be happy to help you with your property choice and answer your questions about the UAE property market and any issues related to it.