Impact of corporate tax on real estate investors in the UAE
Under the new corporate income tax regime, individuals and businesses that are running real estate actively as a business enterprise will be subject to nine per cent corporate tax over and above net profits of Dh375,000.
Real estate development will be considered as business and therefore be liable to corporate tax at nine per cent over an above net profit of Dh375,000 There is no distinction on lease hold vs free hold assets, both will be under the purview of corporate tax.
If real estate is owned for investment purpose by foreign or resident individuals either directly or through a trust or foundation which yield investment income, it would generally not be subject to any corporate tax provided it is not owned by a corporate entity. If it is owned by a corporate entity then the sale of asset will attract capital gains tax.
It is pertinent to note that the income derived from immovable property is taxable in the country in which such property is located. Therefore, if foreign companies and other non resident juridical persons derive any income from real estate located in the UAE, that income would be taxable.
Further, irrelevant of the income generated by the company, one needs to register in the UAE for corporate tax purposes
A relief has been provided to real estate investment trusts (REITs) from corporate tax on income derived from the investment in the UAE, provided that the relevant conditions are met.
Revaluation of an asset (i.e. immovable, intangible and financial asset) will hold a key for many corporates who have held assets and have not valued the same at market value in their books of accounts. The transitional provisions will allow them to opt for revaluation of their assets so as to avoid any additional tax liability arising due to gains / losses.
