Property/Real Estate Tax Rate in Dubai
Dubai can be easily be classified as the ideal place for real estate investment for investors as well as for end consumers.
Dubai is one of the cheapest cities for property investment in the world when taking property tax rates in the world’s large cities; it is easily noticeable that Dubai is one of the cheapest cities in the world for property investments. Compared to other cities, such as Sao Paulo where property taxes reach as high as 30% of the total value, Dubai is seen as an attractive playground for investors, especially taking into consideration that rental yields in some areas reach as high as 8%.
Dubai is a ‘no tax’ emirate, making it a sought-after destination for investors and residents alike. Thanks to its revenues from oil and trade, Dubai doesn’t need to depend on direct taxation for income. However, it gets around the property tax by levying a monthly “housing fee” (also known as the municipality tax), as well as a transfer fee of 4%.
There are only some minor taxes on properties which are paid on real estate. These taxes are the following:
- When you purchase or sell the property in Dubai either residential or commercial, there is the one-time fee of the land registry fee / tax which is 4%. 50% of this fee is paid by seller, and 50% – by the buyer. The fee is calculated from the contract sales-purchase price of the property and is payable to the land department at the day of property ownership transfer. In the real life in most of cases this tax is paid by buyer. This tax / fee is payable by physical persons or companies irrespectively.
- When renting a property in Dubai there is a tax of 5% from the tenancy contract value. This tax is payable by the tenant of the property and is automatically added to the utility bill issued to the tenant and it payable in installments together with the water and electricity payments. In case of commercial properties this tax is 10%, its payment is processed same way as for residential properties.
Such simplified system of taxation of profits from real estate makes any type of yearly tax declarations unnecessary as taxes are collected automatically whereby these tax payments are absolutely minor in real terms.
In relation to inheritance, there are no inheritance taxes on real estate in Dubai ether, irrespective of the level of kinship. At the time of ownership transfer of the property under inheritance regular ownership transfer tax of 4% is applicable.
Dubai’s low tax regime makes the UAE city attractive to expatriates worldwide. Dubai’s tax-free living has always been a magnet for skilled expats from all over the world. Indeed, the idea of working in Dubai and having an opportunity to grow your personal wealth without tax reductions is extremely appealing.
Under the applicable regulations the property in Dubai can be purchased by foreigners and used for private or business purposes (depending on property type) or leased out. Property can be purchased by a foreigner on his name or on a name of a company registered in UAE. Taxation regime of the real estate remains without any changes for private or for a company.
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