UAE property tax: VAT on sales and rents, corporate tax on income

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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Two questions come up in almost every property conversation in the United Arab Emirates. Does this sale, or this rent, carry value added tax? And will the income from the property be caught by corporate tax? Both taxes are federal, both are administered by the Federal Tax Authority, and both treat a home very differently from an office, and a private owner very differently from a licensed business.

This guide sets out the general rules as the Ministry of Finance and the Federal Tax Authority publish them: the VAT treatment of each kind of property, the special way VAT is paid when a commercial building changes hands, what a landlord has to register for, and the line the corporate tax rules draw between a personal real estate investment and a business. It describes the rules for the UAE as a whole; how they apply to one owner depends on that owner's facts.

Ministry of Finance VAT page and corporate tax questions and answers; UAE Government portal, corporate tax page updated 30 March 2026.

Two federal taxes, one authority

According to the Ministry of Finance, VAT was introduced across the UAE on 1 January 2018 at a standard rate of 5%. It is a tax on supplies: a sale, a lease, a service. What matters is the nature of the supply, not who receives it.

Corporate tax came later. The UAE Government's official portal says it is governed by Federal Decree-Law No. 47 of 2022, issued on 9 December 2022, and applies to financial years beginning on or after 1 June 2023. It is a tax on the profit of a business, at 0% on taxable income up to AED 375,000 and 9% above that. The same portal lists real estate management, construction, development, agency and brokerage among the activities in scope.

The Federal Tax Authority administers, collects and enforces both. It has also published the two documents this guide leans on most: the Real Estate VAT Guide, coded VATGRE1 and dated April 2021, and the corporate tax guide on Real Estate Investment for Natural Persons, coded CTGREI1 and dated October 2024. The second describes itself as non-binding, and both are explanations of the law rather than the law itself.

Homes: zero-rated once, exempt afterwards

For residential property the rule has two halves, and the Ministry of Finance explains the purpose of each. Supplies of residential property are generally exempt, so that people buying a home do not carry VAT as a cost they cannot recover. The first supply of a newly built home is zero-rated instead, so that the developer can recover the VAT paid on construction.

The difference between the two words is practical. A guidance note on the UAE Government portal, citing Federal Decree-Law No. 8 of 2017, explains that a zero-rated supply (Article 45) is still a taxable supply, taxed at 0%: the supplier records it, reports it and can recover the VAT on the costs behind it. An exempt supply (Article 46) is not taxable at all: no VAT is charged, and the supplier cannot recover VAT on related expenses. The note lists the first sale or rent of residential buildings as zero-rated, and other residential buildings, together with bare land, as exempt.

The Real Estate VAT Guide adds the conditions. The first supply of a residential building, by sale or by lease, is zero-rated when it takes place within three years of completion. Completion is the date a qualified party certifies the building as complete, or the date it is first occupied if that comes earlier. Every later supply is exempt, even one made inside the same three years. A home bought off-plan or partly completed is also zero-rated, provided the building qualifies as residential.

What counts as residential is defined in the same guide. A residential building is one occupied, or intended to be occupied, as a principal place of residence. Accommodation for students and school pupils, for the armed forces and police, and orphanages, nursing homes and rest homes are included. Hotels, motels, bed and breakfast establishments, hospitals, and serviced apartments that provide services beyond accommodation are not, and nor is a movable structure or a building put up or converted without lawful authority. Labour accommodation is judged case by case.

Two special cases follow from these rules. A building converted into homes can have a zero-rated first supply if the supply happens within three years of the conversion being completed and no part of the original building was residential in the five years before the works began. And a UAE national who builds a new home for personal or family use can ask the Federal Tax Authority to refund the VAT paid on contractors, professional services and building materials; the guide says the claim must be lodged within 12 months of completion, and that furniture, appliances and landscaping are left out.

For a buyer or a tenant of an ordinary home, the result is simple: the price or the rent carries no VAT, whether the supply is zero-rated or exempt. The cost shows up elsewhere, and on the seller's side. Because a resale is exempt, the guide notes that VAT on related costs such as an agent's fee or upkeep cannot be recovered.

Commercial property and land

Commercial property is defined by what it is not. In the Real Estate VAT Guide it is any land or building that is not residential, not a charitable building and not bare land. The Ministry of Finance states the rule in one line: supplies of commercial property, sales and leases alike, are taxable at 5%. Where a price is paid in instalments, VAT applies to each instalment, and a business buyer making taxable supplies can recover the VAT on its related costs in full.

Bare land is exempt whether it is sold or leased. The guide defines it as land with no completed or partially completed building and no civil engineering works on it, and treats a building as partially completed once construction has passed foundation level. Land that is not bare is covered land and is taxed at 5%.

A mixed-use building is split. Each part is taxed according to its use: the shops at 5%, the flats exempt or, on a first supply, zero-rated. If the whole building is sold in one transaction, the guide says the price is apportioned between the residential and the commercial parts.

How VAT is paid on a commercial sale

When a commercial property is sold by someone other than its developer, the VAT does not travel through the seller. The Real Estate VAT Guide describes a special payment process in which the buyer pays the tax to the Federal Tax Authority directly, and the land department will not register the transfer without proof of it.

A worked example, with illustrative figures: an office is resold for AED 4,000,000 before VAT. The tax is 5% of that, AED 200,000. The buyer pays the AED 200,000 to the Federal Tax Authority before the transfer and AED 4,000,000 to the seller, AED 4,200,000 in all. A buyer registered for VAT and using the office to make taxable supplies can then claim the AED 200,000 back as input tax under the ordinary rules; a buyer making only exempt supplies cannot.

The process has stated limits. It does not apply to residential sales, to commercial leases, to sales by the developer, or to the transfer of a business as a going concern. That last exception matters for let buildings: the guide says the sale of a commercial property with its existing tenants to a taxable buyer can qualify as the transfer of a business. Whether a given sale qualifies depends on the facts of the deal.

Rents, service charges and lease events

Rent follows the building. A tenant of a home pays no VAT on the rent. The government guidance note on zero-rated and exempt supplies gives owners who let property for residential purposes as its example of suppliers who make only exempt supplies and therefore do not have to register. A tenant of an office, a shop or a warehouse pays 5% on the rent.

A worked example, again with illustrative figures: a shop is let at AED 240,000 a year, payable in four instalments of AED 60,000. Each instalment carries VAT of AED 3,000, so the tenant pays AED 63,000 a quarter and AED 252,000 over the year, of which AED 12,000 is VAT. A lease with periodic payments is a continuous supply. For those, the guide fixes the date of supply as the earliest of three events: the issue of the tax invoice, the due date shown on the invoice, or the receipt of payment. If none of them happens within 12 months, the 12-month point becomes the date of supply.

The Real Estate VAT Guide also works through the events that happen during a commercial lease:

• Inducements. A payment a landlord makes to a VAT-registered tenant to take the lease is consideration for a service by the tenant, taxed at 5%. Where the tenant is not registered, it falls outside VAT.
• Rent-free periods. These are generally not a supply, unless the tenant gives something in return.
• Surrender and variation. Money paid to end or change a lease is taxed at 5%. A variation with no money changing hands is generally not a supply.
• Dilapidations. A payment for repairs the tenant should have carried out is taxable at 5%. Damages for breach may fall outside the scope of VAT.

Service charges sit apart from rent, and this is where residential owners do meet VAT. The guide says charges for the upkeep of communal areas made by a master developer, a building owner or an owners' association are taxed at 5%. An owners' association or management entity must register when it meets the conditions the guide lists, which include controlling the common areas, having a legal personality distinct from its members, carrying on an economic activity or exceeding the mandatory threshold. It can then recover the VAT on the maintenance services it buys.

Fees around a transaction are services too. The Dubai Land Department's service pages quote trustee fees on transfers "plus VAT", for instance AED 4,000 plus VAT, which at 5% is AED 200, and show the AED 55 partner fee for registering a tenancy contract with AED 2.75 of VAT on top.

Who has to register for VAT

Registration turns on taxable supplies, and zero-rated supplies count as taxable. The Ministry of Finance sets the mandatory threshold at AED 375,000 of taxable supplies and imports and the voluntary one at AED 187,500. The government guidance note gives the two tests for the mandatory threshold: taxable turnover above AED 375,000 over a 12-month period, or an expectation of exceeding it in the next 30 days.

For property owners this produces three situations.

1. Residential only. An owner whose only supplies are exempt residential lets does not have to register, however much rent is collected, because exempt supplies are not taxable supplies.
2. Commercial. An owner letting commercial property makes taxable supplies and falls under the general thresholds. On the figures above, a single shop let at AED 240,000 a year is under the mandatory threshold of AED 375,000 but over the voluntary one of AED 187,500; two such shops, at AED 480,000, are over the mandatory one.
3. Zero-rated only. A supplier making only zero-rated supplies above the threshold must register, but may ask for an exception from registration if it makes no supplies at the standard rate. The guidance note spells out the trade: with the exception there are no regular returns, and no recovery of input tax.

Recovering VAT on property costs

The right to recover VAT on costs mirrors the treatment of the supply. According to the Ministry of Finance, input tax is fully recoverable when it relates to a taxable supply made or intended to be made, and not recoverable when it relates to an exempt supply. Costs that serve both must be apportioned.

The Real Estate VAT Guide applies this to a mixed-use building. VAT on repairs that are wholly for the commercial part is recoverable in full; VAT on repairs wholly for the residential part is not. The remainder is split by the standard method, taxable supplies divided by taxable plus exempt supplies, rounded to a whole percentage. A real estate business may ask to use floor space instead, but a special method needs the Federal Tax Authority's written approval in advance. The guide says the VAT on constructing a mixed-use development is generally recoverable in full, because the first supply of the residential part is zero-rated.

Agents' fees follow the same logic. The guide classes estate agency as a service related to real estate. A fee tied to a taxable commercial sale or lease carries VAT that the client can recover in full; a fee tied to an exempt supply, such as a residential resale or a sale of bare land, carries VAT that cannot be recovered.

Corporate tax when a company holds property

A company that owns, lets, manages, develops or brokers property is a business, and its profit is within corporate tax. The rate scale is the general one: 0% on taxable income up to and including AED 375,000 and 9% above. A worked example with illustrative figures: a company whose taxable income for the year is AED 1,000,000 pays nothing on the first AED 375,000 and 9% on the remaining AED 625,000, which is AED 56,250.

The Ministry of Finance's corporate tax questions and answers add several points that matter for property.

• Sale profits. Capital gains are included in taxable income like any other business income; the regime draws no line between capital and revenue assets unless an exemption applies. Revaluation gains and losses are taxed as they are reported in the accounts, unless the taxpayer has elected to recognise them only on realisation.
• Foreign companies. Income a foreign juridical person earns from UAE real estate may create a taxable nexus in the UAE under Cabinet Decision No. 56 of 2023, and so may be subject to corporate tax. Other UAE-sourced income of non-residents is subject to withholding tax at a rate that is currently 0%.
• Free zones. For a Qualifying Free Zone Person, income from commercial property in a free zone earned from another Free Zone Person is qualifying income, taxed at 0%. Income from commercial property earned from counterparties outside the free zones, and income from residential units, hotels and other non-commercial property, is taxed at 9% whoever pays it. Commercial property here means immovable property in a free zone used exclusively for a business and not as a residence or accommodation. Income from property outside a free zone is an excluded activity.

Small Business Relief is available to resident persons whose revenue is AED 3 million or less, under Ministerial Decision No. 73 of 2023. The relief was first limited to tax periods ending on or before 31 December 2026; the Ministry of Finance announced on 7 August 2026 that Ministerial Decision No. 131 of 2026 extends it to tax periods ending on or before 31 December 2029, with the same threshold. A business that elects it in its return is treated as having no taxable income for that period.

Individuals: investment or business?

An individual is within corporate tax only when carrying on a business or business activity in the UAE with a turnover above AED 1 million in a calendar year, under Cabinet Decision No. 49 of 2023. The Ministry of Finance says this holds regardless of citizenship or visa status, and that the turnover of several businesses run by one person is added together. Three kinds of income never count towards that turnover, whatever their size: wages, personal investment income, and real estate investment income.

The third is the one that keeps most private landlords outside the tax. The Federal Tax Authority's guide for natural persons defines Real Estate Investment as investment activity related, directly or indirectly, to selling, leasing, sub-leasing or renting land or real estate in the UAE, that is not conducted, and not required to be conducted, through a licence. The test is therefore the licence, not the scale. The guide says it does not matter how many properties are held, what they are worth, or whether the tenants use them for business. Residential units, commercial premises, warehouses, parking and land can all qualify.

A licence, in the guide's sense, is any document from a licensing authority that permits a business activity; it names the Dubai Land Department and the emirates' Departments of Economic Development as examples of such authorities. A holiday home permit is a licence. The registration of a tenancy contract, such as Ejari in Dubai or Tawtheeq in Abu Dhabi, is an administrative record and is not. If a licence is required and the owner has not obtained one, the activity is still treated as a business.

The list of qualifying activities is closed: selling, leasing or renting, and sub-leasing. Services are outside it. Property management is not a real estate investment, because the income has to come from the property itself. The guide's own examples show where the line falls.

For a foreign individual, the Ministry of Finance draws the same conclusion: a person investing in UAE real estate personally, without a licence, is generally not subject to corporate tax or its compliance obligations.

The exclusion cuts both ways. Because the income is outside the tax, the guide says the related expenses cannot be deducted and a loss on the property gives no relief against business profit. And an individual who holds property through a company does not own the rent: in the guide's Example 13 the company's rental income is taxable in the company's own right, while the dividend it pays to its owner is generally personal investment income.

When an individual's property income is taxed

Once property is run through a licence, the ordinary rules for individuals in business apply. The first step is the turnover test. Turnover, in the Authority's earlier guide on the taxation of natural persons, coded CTGTNP1 and dated November 2023, is the gross income of the business in a calendar year, before costs. Above AED 1 million, the individual must register for corporate tax; the Federal Tax Authority said when it published that guide on 24 December 2023 that the test applies from calendar year 2024. Crossing the line does not shelter the first million: the guide states that all the profit of the business then becomes taxable, on the usual scale.

A worked example with illustrative figures: an individual lets licensed holiday homes and collects AED 1,400,000 in 2025, and also receives AED 300,000 of rent from two ordinary flats let without a licence. Turnover is AED 1,400,000, because the AED 300,000 is real estate investment income and is left out. The threshold is crossed. If the holiday business makes a profit of AED 600,000, the tax is 9% of the AED 225,000 above AED 375,000, which is AED 20,250. Because revenue is under AED 3 million, the individual may instead elect Small Business Relief for that period and be treated as having no taxable income.

The compliance steps that guide sets out are these. An individual's tax period is the calendar year. One return covers all of the person's businesses and is due within nine months of the end of the period, so the return for 2025 was due by the end of September 2026. A registered individual whose turnover falls back to AED 1 million or less stays registered and files a nil return; deregistration is possible only once all business has ceased, on an application made within three months of stopping. Financial statements are required, on a cash basis if turnover does not exceed AED 3 million, and audited if it exceeds AED 50 million. Costs shared between the taxed business and excluded property are apportioned by a fair and consistent method; the real estate guide's holiday home example uses the value of the properties.

What the guides leave open

Several points depend on the case or are not settled by the pages read for this article.

The corporate tax guide for individuals warns that double taxation agreements override the domestic rules where they conflict and must be checked separately. It also points to the general anti-abuse rule in Article 50 of the Corporate Tax Law: the Federal Tax Authority can counteract an arrangement that lacks commercial substance and mainly aims at obtaining the real estate exclusion, and treat the income as taxable.

On the VAT side, the Real Estate VAT Guide refers to the capital assets scheme, which adjusts input tax over time when the use of a property changes, without setting out its thresholds in the passages relied on here. The line between a home and a serviced apartment, and the status of labour accommodation, are assessed on the facts. The Federal Tax Authority's guide dates from April 2021, and its real estate topic page was last updated on 17 January 2022; the guide remains the Authority's published explanation, but a reader relying on a detail should confirm that it has not been amended.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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