Property Tax in UAE

The implementation of the VAT Law and the subsequent Executive Regulations affects parties carrying out business and asset transfers, excluding share acquisitions. Article 7 of the VAT Law provides that the transfer of the whole or independent part of a business from a person to a taxable person, which is made with the intention of continuing the business that was transferred, is not considered to be an active supply, and will therefore not be subject to VAT. This implies that the sale and purchase of a business will not incur VAT liability for the seller or the buyer. It is important to note that the relief only applies where the transfer is made to a taxable person who is registered, or obliged to register, for VAT.

Transfer charges are to be levied for direct and specific indirect transfers of real property situated in the UAE, including the transfer of shares in a company holding real estate in the UAE. Additionally, in certain circumstances, such charges are levied on partial transfers.

The rate of tax is dependent upon the emirate in which the property is situated. For example, in the Emirate of Dubai, the tax rate is 4%, to be borne equally by the buyer and seller. However, in practice, the transfer fee is usually borne by the buyer.

Transfer tax is applicable on the transfer of shares of a company established in the Jebel Ali Free Zone (JAFZA) that holds real estate property in the Emirate of Dubai, even though it would benefit from all the other benefits that companies in the free zones in the UAE enjoy.

Taxes on the transfer of property are ordinarily payable on:

  • Sale or purchase of real estate.
  • Leasing of property.
  • Mortgage.

A company established in the JAFZA that holds real estate property in Dubai is also liable to pay transfer tax in the event of a transfer of shares of that company.

  • Liable party/parties– Transfer fees are divided equally between the parties but can solely be paid by the purchaser, depending on any agreement between the parties.
  • Applicable rate(s)– The real estate property tax rates in Abu Dhabi and Dubai are 2% and 4%, respectively. Companies that are established in the JAFZA and that hold real estate property in Dubai are liable to pay 4% transfer tax on a transfer of shares.
  • Notary fees

  • Key characteristics– In all the emirates, notary fees are payable to a notary public for having corporate documents attested for legal purposes.
  • Triggering event– Notary fees are paid to the notary public of the relevant emirate for notarisation of corporate documents.
  • Liable party/parties– Under the various local income tax decrees of each emirate, notaries are paid by the person possessing the document(s).
  • Applicable rate(s)– Notary fees in Abu Dhabi and Dubai can range from AED100 to AED500.