The UAE real estate market is anticipated to reach a staggering value of nearly USD 700 billion by the end of 2025.^[1] Within this market, the Residential Real Estate segment reigns supreme, projected to hold a market volume of over USD 400 billion in the same year. Furthermore, a steady annual growth rate of 2.28% is expected between 2025 and 2029, resulting in a market volume of USD 759.04 billion by the latter year. All of this is predominantly driven by population growth, the influx of wealthy foreign residents and various initiatives (including the recent announcement of assistance with first time buyers in Dubai).

With the UAE positioning itself as a global hub for businesses and people, it is important to understand the key tax risks and opportunities when investing in property in the UAE.

Owning Real Estate as an Individual or Through a Legal Entity

When considering making an investment in UAE Real Estate (RE), the first question is whether to own real estate individually or through a legal entity. The main reason for this is that Article 2(2) of Cabinet Decision #49 of 2023 specifically excludes Real Estate Investment* income from being taxable for Natural Persons. For ease, we have identified the following scenarios and provided our thoughts:

A quick glance at the table above shows that there are real tax advantages of purchasing and owning UAE RE in your individual capacity. Having said that, everything is dependent on the individual facts and circumstances of the transaction and the parties involved.

Please note that in all the above scenarios, whilst not a tax, transfer fees will apply. Transfer fees are calculated as a percentage of the acquisition price, and vary depending on the Emirate. If we take Dubai as an example, the Dubai Land Department imposes a transfer fee of 4% of the acquisition price. Who pays this 4% is subject to commercial negotiations, but the current trend is that it is paid by the Buyer.

Taxation of Real Estate Investments Made by a Corporation

Should you decide (for tax or other reasons) to invest in real estate via a corporation, the following should be considered:

• UAE Corporate Tax – the UAE company would in principle be subject to UAE CT at a Federal level, at a 9% rate (on Taxable Income exceeding AED 375,000), unless it is incorporated in a UAE Free Zone and meets the Qualifying Free Zone Person (QFZP) conditions (see below). Note that should you be subject to UAE CT, you will need to register with the Federal Tax Authority within 3 months from the license issuance and submit tax returns within 9 months from the end of each financial year (i.e. it is an annual compliance requirement).
   
• QFZP – In case the UAE company meets the QFZP conditions, the following CT treatment should apply to rental income derived from the UAE real estate, depending on the nature / use of the real estate assets in the free zone:
  • Commercial Real Estate: Qualifying Income subject to a 0% CT rate, when the tenant is a Free Zone Person. Taxable Income subject to a 9% CT rate, when the tenant is a Non-Free Zone Person.
  • Residential Real Estate: Taxable Income subject to a 9% CT rate.
  • Mixed-use Real Estate (commercial and residential): Subject to a 0% or 9% CT rate based on the use of the respective components of the property (as per above).
     
• Withholding Tax (WHT) – Currently, the payment of dividends, interest and royalties is subject to a WHT rate of 0%.
   
• Interest Limitation – The UAE CT law allows the deductibility of interest expenditure, insofar as it does not breach the General Interest Deductibility Rule (i.e. the higher of 30% of the tax-adjusted EBITDA or AED 12million) or the Special Interest Deduction Limitation rule (i.e. no deduction on interest expenditure on loans with a Related Party in certain situations).
   
• Depreciation/Amortization – The UAE tax law allows any depreciation and amortization costs, as long as this is aligned with an approved accounting policy agreed with an auditor and follows IFRS principles.
  • Note that there are special rules governing Depreciation Adjustments for Investment Properties held at Fair Value, which will not be discussed in detail in this article but can be found in MD #173 of 2025.
     
• Transfer Pricing (TP) – Any related party transactions need to be priced and documented on an arm’s length basis. Typical related party transactions in the real estate industry are:
  • Acquisition or Development Funding – Both the interest rate and the quantum of debt should be at arm’s length. Additionally, the overall returns for any treasury centre should be assessed from a TP perspective.
  • Services Including Construction, Development, Management and Support Services – Pricing for these services can range from a simple cost plus to a percentage of the total cost of the project.
  • Sale / Lease Transactions – While the market value should be assessed using typical valuation methodologies, a full arm’s length analysis would ensure that the variable return flows to the parties that manage the risk and has the financial capacity to bear the risk.
     
• Tokenisation We will cover this in greater detail in a future article.
   
• Real Estate Investment Trusts (REITs) – Note that REITs in the UAE are generally tax exempt, however, they must meet certain conditions where by the entity has a separate legal personality (i.e. distinct from its beneficiaries), it will be a juridical person and so it would, in the first instance, be subject to Corporate Tax in its own right. However, an application to be treated as fiscally transparent may be made to the FTA where the relevant conditions are met.
   
• Capital Gains – If no exemptions/reliefs are available (e.g. QFZP), then capital gains from the direct sale of the UAE real estate will be taxable. In the UAE, capital gains form part of the taxable person’s taxable income.
   
• VAT – VAT on purchase of real estate depends on the type of the real property bought, regardless of an individual or corporation buying it.
  • Commercial real estate is subject to 5% VAT. A special payment obligation on buyers also exists where such commercial real estate is bought from any supplier other than the developer of that property.
  • For residential real estate, the following scenarios exist.
    • If bought at off-plan stage or as a “first sale” within three years of its completion, no VAT is required to be paid.
    • If bought from secondary market, VAT is not required to be paid (although a seller may uplift the price to recover blocked input VAT). This also applies if residential real estate is bought from a primary market after three years of its completion date (unlikely in the current market dynamics).

Further, it is important to distinguish between residential and commercial real estate. Certain real estate (such as hotel or serviced apartments) may qualify as commercial real estate for VAT purposes. It is important to verify the “permitted use” of such units as disclosed with the Land Department authorities.

Additional challenges investing via a foreign company 

Whilst there are no regulations or laws expressly forbidding it, owning property through a foreign company is not recommended for two main reasons: 

• Practically speaking, we have seen difficulties completing the transaction by the relevant land department of the Emirate in question; and
• Cabinet Decision #56 of 2023 mentions that “any juridical person that is a Non-Resident Person shall have a nexus in the State if it earns income from any Immovable Property in the State”. As such, any income earnt by a foreign juridical person shall be taxable as a nexus is created within the UAE.

Note the transfer fee mentioned above still applies (as it applies equally to both juridical and natural persons).

Recommendations

Considering the above, the UAE seems to be one of the most popular real estate markets in the world. However, making such a decision can come with a lot more considerations that location, and therefore looking at your own profile will determine the best route for you. Starting from a simple question such as ‘Should I hold the real estate in my capacity as an individual or through another vehicle, such as a legal entity, fund, or family foundation’ will lead you to arrive at such at the best possible outcome.

Should you wish to have a discussion on any aspect of UAE real estate, please feel free to contact us.

* This is defined as “Any investment activity conducted by a natural person related to, directly or indirectly, the sale, leasing, sub-leasing, and renting of land or real estate property in the State that is not conducted, or does not require to be conducted, through a Licence from a Licensing Authority”.
 

[1] Statista. “Real Estate – United Arab Emirates.” Market Insights Outlook. Accessed December 24, 2025. https://www.statista.com/outlook/fmo/real-estate/united-arab-emirates.