The UAE, known for its vibrant real estate market, has just seen a significant shift in its financial landscape. With the announcement of the new ministerial decision on May 17, 2023, there are updated regulations for tax liability in the UAE, and it’s a major win for residents and investors alike.
This strategic change, according to UAE Cabinet Decision No. (49) of 2023, clearly outlines that business owners in the UAE will only be liable to pay Corporate Tax if their annual turnover exceeds AED1m ($272,000). More significantly for those interested in the real estate sector, income generated from real estate and personal investments will not be considered as taxable income.
The Changing Face of UAE’s Corporate Tax Rules
Issued to provide transparency and clarity, the new decision ensures that only income derived from business activities is subject to taxation. This means personal income from employment, investments, and, importantly, real estate without licensing requirements, remains free from the reach of Corporate Tax.
In the context of real estate, this is especially significant. If you’re a UAE resident and own rental properties, the income from these properties will not be subject to Corporate Tax, since they fall under out-of-scope categories. The same applies to income generated from personal investments.
Boosting Start-ups and Small Businesses
The new decision paves the way for a dynamic, thriving business environment, providing a welcome boost for start-ups and small businesses. If a UAE resident runs an online business, for instance, they’ll only need to register and pay Corporate Tax if their total turnover surpasses AED1m in a calendar year.
Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, stated that the decision is proof of the UAE’s dedication to establishing a competitive and clear tax framework for both local and foreign individual investors. He went on to add that by simplifying the Corporate Tax system, the UAE is fostering an attractive business environment that fuels the growth of small businesses, start-ups, and the broader economy.
A New Era of Real Estate Investment
For those considering investing in the UAE real estate market, this update brings exciting opportunities. The fact that income from real estate will not be considered as taxable income means potential for higher returns on investment and increased profit margins. Whether you’re a seasoned investor or looking to buy your first property, the updated tax laws make the UAE an even more attractive destination for real estate investment.
At Altitude Real Estate, we’re here to help you navigate these changes and understand how they can benefit your real estate investments. With a deep understanding of the UAE real estate market, our expert advisors are ready to guide you on your investment journey in this new tax landscape. Contact us today to start exploring your opportunities in the UAE real estate market.
