In the United Arab Emirates, a corporate tax on corporate profits was recently introduced, which could have far-reaching implications, even for individuals acting as property owners. Many property owners are uncertain under what circumstances income from renting or selling properties would be considered taxable corporate profits.
In principle, individuals are subject to the new corporate tax if they conduct a business or commercial activity with an annual turnover of more than 1 million AED (approximately €250,000). However, there are important exceptions. For instance, income derived from labor, personal investments, or directly from real estate investments is exempt from this tax. Real estate investments include income generated from activities directly or indirectly related to land or real estate in the UAE that do not correspond to a licensable business activity.
The crucial question for property owners is whether and when they require a commercial license to manage, rent, or sell their properties. The corporate tax law does not provide regulations on this matter. Therefore, it is essential to carefully examine the regulations of the relevant licensing authority, depending on where the property is located.
So far, it is known that specific real estate activities require a license. These include:
- "Real Estate Broker License": Required for anyone wishing to broker real estate transactions, including leasing and sales.
- “Developer License”: Necessary for developers who develop and sell newly built real estate projects.
- "Property Management License": Required for companies managing properties on behalf of the owner.
The regulations for private property owners who only rent out or sell their own properties are not yet generally defined. Typically, private property owners with one or only a few properties are not required to obtain a license in the UAE. Thus, they would initially also be exempt from the tax. However, it is essential to note that these regulations can change rapidly.
Therefore, property owners are well advised to inquire about possible licensing requirements in a timely manner and, if necessary, seek professional assistance to ensure compliance with all legal requirements.
These new regulations highlight the importance of staying up to date and keeping an eye on changing laws and regulations, especially for those who have invested in the dynamic real estate market of the UAE.
