Understanding Taxes and Fees For Property Purchases in UAE

The UAE is well-known for its real estate market! Investors and expatriates from across the globe make a lot of money by investing in this country. The reason behind this attraction is the UAE’s favourable property tax system. In this article, we’ll explore all sides of property tax in the UAE. We will be focusing on taxes related to property transfers and why the UAE’s real estate tax system is considered one of the best globally. You will also be guided about the property taxes needed to be aware of when they own property in the UAE. 

Property Tax in UAE

UAE property tax, especially in Dubai, is an investor-friendly territory. It doesn’t apply to residential properties which makes it attractive for real estate investors. 

Compared to other cities, real estate fees in the UAE are relatively low. There are no capital gains or inheritance taxes on properties. The cherry on top, the property registration process is efficient through the Dubai Land Department (DLD). This provides 100% transparency and security to both the government and the buyers. However, buyers should be aware of other fees like registration, agency, and mortgage fees. 

What Makes the Real Estate Tax System of the UAE the Best?

Here are some of the reasons that make property tax in the UAE the best!  

• No Taxation on Properties in Dubai

One of the most attractive features of the UAE’s property tax system, especially in Dubai, is that there are no property taxes on residential properties. This unique advantage encourages both local and international investors to consider the Dubai property market for investment.

• Second Lowest Real Estate Taxes in the World

Compared to other major global cities, the UAE’s property taxes are among the lowest, making it a cost-effective option for property investment. This affordability enhances the appeal of the UAE’s property market for investors.

• Dubai – A Cost-Effective Property Investment Destination

The absence of property taxes and relatively low fees in Dubai make it one of the most affordable cities for property investment worldwide. This affordability attracts investors from different parts of the world.

What Is The Property Transfer Fee in the UAE?

The transfer fees on property tax in UAE, also known as the “transfer fee” or “registration fee,” are mandatory for real estate transactions. It applies when transferring ownership from the seller to the buyer. The fee is calculated as a percentage of the property’s purchase price or market value, whichever is higher. The percentage may vary based on the emirate and property type.

Types of Property Transfer Taxes in the UAE 

Taxes on property transfers are a vital chunk of real estate transactions in the UAE. When buying or selling property, there are some UAE property taxes during the process to ensure a smooth transaction. 

• Transfer Fee

It stands out as a primary property tax related to the transfer. This fee is imposed when transferring ownership from the seller to the buyer. It is calculated based on the property’s purchase price. The amount is paid to the Dubai Land Department for keeping a record of the transaction. As a main piece of property transfer costs, both buyers and sellers must contribute to the transfer fee during the negotiation. 

• Agency Fee

This fee is a commission paid to real estate agents or brokers who facilitate the property transaction. Depending on the agreement, either the buyer or the seller typically covers this tax on real estate agents’ work. Buyers opting for a mortgage to finance their property purchase should be aware of potential mortgage fees.

• Mortgage Fees

These fees may include charges for processing the loan, property valuation, and administrative expenses.

It is crucial to know that property tax fees related to transfers can vary across the different emirates in the UAE. Each emirate may have its specific regulations for property transactions. The type of property being transferred also influences the applicable taxes and fees. To navigate these successfully, buyers and sellers must seek the services of experienced real estate professionals. 

• Notary Fees

Notaries are government-appointed officials responsible for verifying the validity of documents, making them legally recognised. Notary fees on property tax in the UAE are charges associated with authenticating legal documents used in real estate transactions. Rental contracts and mortgage agreements are two of the documents that come under this category.

The fees vary depending on the emirate and the document being notarized. For example, in Dubai, the fee is typically 0.25% of the property’s value, while in Abu Dhabi, it could be 0.25% for properties up to AED 500,000, and 0.125% for those valued between AED 500,001 and AED 2 million. Remember, notary fees are separate from other property taxes. 

Does the UAE Impose Tax on Real Estate?

The answer is subjective as each emirate has different policies related to its property tax. Dubai has no property tax on residential properties, however, it has a “Transfer Fee” for property transfers and an “Agency Fee” for agent commissions.

On the other hand, the UAE commercial properties that are not manufacturing any harmful products and earning more than 102,000$ a year have to pay 9% of the tax and 5% of VAT from July 2023. Businesses that are importing stuff have to pay 5% of the import amount. The good news is there is no export tax. Pride of the UAE, Oil and gas companies have to pay 50%. foreign banking sector needs to submit 20%. And lastly, the high sugar and tobacco-oriented businesses have a whopping amount of 50-100% property tax. 

Taxes and Fees for Buying Property in Dubai

These fees are charged when ownership of a property is transferred from the seller to the buyer. The Dubai Land Department records the transaction, and fees are paid for this registration process. Apart from the agent, mortgage, transfer, and notary fees, here are some of the other taxes that apply to UAE properties. 

• Security Deposit 

If you’re renting a property in Dubai, you might need to provide a security deposit. This deposit acts as a protection for the landlord in case there are any damages to the property or unpaid rent during your tenancy.

• Insurance Fees  

Property insurance fees cover insurance policies for the property, safeguarding it against potential risks or damages. This insurance is an added protection for property owners.

• Property Service Charge 

If you own a property in a building or community with shared amenities and facilities, you’ll need to pay property service charges. These fees go towards the maintenance and upkeep of those shared areas, managed by the developer or property management company.

• Dubai Electricity and Water Authority Fees

These fees cover the costs of electricity and water consumption in the property. They are billed by the Dubai Electricity and Water Authority (DEWA) for the services provided.

Foreign Resident Property Taxes Rules in the UAE

In the UAE, taxes on real estate for foreign residents vary across different emirates. In Abu Dhabi, expatriates can own residential units for 99 years with ownership deeds, Musataha contracts (50 years), Usufruct contracts (99 years), or long-term leases (at least 25 years). Foreigners can also own properties in specific areas like Yas Island, Saadiyat, and Al Raha Beach. However, in Sharjah, foreign nationals and companies owned by them can’t own property. But can get usufruct rights for a maximum of 100 years, with special approval. 

Conclusion

If this article makes you invest in the properties of the Emirates, we won’t judge you. After all, they are quite enticing. For more such content, you can connect to our website. You can also see different property listings and seek our professional advisor to make your very own investment in the UAE.

Recommended for you :

Frequently Asked Questions (FAQs)