The increasing number of foreign investors in the Dubai real estate market indicates that it comes with favorable conditions and many benefits. In addition to benefits such as a high standard of living, world-class education, safety, and security, there are no property taxes in Dubai.
In this article, we’ll cover the main fees that need to be paid by foreign property investors, give an overview of the tax system, and mention the key areas for investment in Dubai.
- The main benefit of the tax system in Dubai is that there’s no income tax, capital gain, or property tax in Dubai. However, you need to pay attention to charges like registration fees, maintenance fees, or agent fees.
- The key areas of Dubai for property investment are Downtown Dubai, Dubai Marina, Palm Jumeirah, Business Bay, and Jumeirah Village Circle (JVC).
Overview of Dubai’s Tax System for Property Investors
Taxes in Dubai are very low. That’s one of the main reasons why so many investors are attracted by the idea of investing in Dubai. While there’s no capital gain or annual property tax in Dubai, in your buying stage you need to pay a registration fee to DLD (Dubai Land Department). The fee is typically 4% of the real estate’s price.
Even if there’s no Dubai property tax, as a property owner you need to pay an annual service charge for communal area maintenance. The amount of the charge depends on the location and property type. Additionally, you need to keep an eye on indirect taxes like Value Added Tax (VAT), which is applied to the sale of new residential properties and all commercial properties. However, the following sales on the same property are held without VAT.
How Dubai’s Property Tax System Benefits Foreign Investors
Dubai property tax system is considered one of the most favorable in the whole world. Here are some advantages of the system:
- No annual property tax: it’s not required for property owners to pay an annual property tax in Dubai.
- No income tax or capital gains: Profits on the property sale or rental income aren’t a subject of taxation.
- No VAT on Residentials: Residential properties in Dubai are typically exempt from VAT, except for the first-time purchase of a hotel apartment directly from the developer, which is subject to a 5% VAT. Furthermore, while the 4% DLD registration fees are not subject to VAT, it is applicable to broker commissions and trustee office fees.
- Registration Fee: The most significant fee that you’re gonna pay is the one-time charge to DLD for your property registration. It’s typically 4% of the property.
- High level of legal regulations: Dubai boasts of its transparent legal framework and ensures its investors that real estate regulations are clear and investor-friendly.
The Dubai Property Market and the UAE Golden Visa
Dubai's property market is one of the most attractive places for foreign investors to invest. In fact, the EU Tax Observatory states that 43% of the total value of all residential property belongs to foreigners. According to the same source, foreign-owned residential real estate grew by 20%—around $23 billion—between the beginning of 2020 and early 2022. One of the key reasons driving investors in the Dubai real estate market is that there’s no property tax in Dubai for foreigners. Another reason is the opportunity to get a UAE Golden Visa. In 2019, the UAE introduced a Golden Visa program, which aims to provide investors, entrepreneurs, and professionals with a residence permit in exchange for a significant contribution to their economy.
Property investors need to invest a minimum of AED 2 million in real estate. The property can be either residential or commercial. The important thing is to make sure that the property is placed in freehold zones. This means, that the property needs to be in designated areas where expats and foreign investors can own property with 100% ownership rights.
As a property investor, you need to know that there are no direct property taxes in Dubai, however, you need to consider costs like registration fees, charges for communal area maintenance, agent fees, etc.
Read more about UAE Golden Visa requirements here.
Thanks to its favorable tax system, Dubai continues to be one of the most attractive destinations for investors, especially in the real estate market. With no capital gains taxes, income taxes, or property taxes in Dubai, investors are able to maximize their returns and enjoy a high standard of living.
With the right guidance and insights about the market, you can take advantage of its benefits, whether for personal use or as a profitable investment.
FAQ
The most important and inevitable payment that you need to make while purchasing property in Dubai is the registration fee which needs to be paid to DLD and costs the 4% of the real estate’s price.
No, property owners don’t have any taxes on rental income.
In Dubai, VAT on property transactions depends on the property type. Residential properties are usually VAT-free, except for the first sale by a developer, which is a subject of 5% VAT. Commercial properties, however, are subject to a 5% VAT. While Dubai Land Department (DLD) registration fees are exempt from VAT, broker commissions and trustee office fees are subject to it.
Yes, you can qualify for residency through property investment in Dubai. If you’ve invested at least AED 750,000 in real estate, you can be eligible to apply for a 3-year residency. However, the most common option is investing at least AED 2,000,000 and getting a 10-year residency.
