Insights on Recent Changes to UAE Tax and VAT Regulations

Overview of Recent Tax Changes

The UAE has undergone significant tax reforms in recent years that directly impact the real estate sector. With the introduction of Corporate Tax effective 1 June 2023, alongside ongoing adjustments to the Value Added Tax (VAT) framework, property investors, developers, and owners need to stay informed about their obligations and opportunities.

As of 2026, the UAE's tax landscape continues to evolve. The Federal Tax Authority (FTA) has issued several clarifications regarding the treatment of real estate transactions under both corporate tax and VAT regulations.

Corporate Tax and Real Estate

The 9% corporate tax rate applies to businesses earning over AED 375,000 in taxable income. For real estate companies, this means:

• Property management companies are subject to corporate tax on their management fees and service income
• Real estate investment income earned by individuals in their personal capacity remains exempt
• Free zone companies involved in real estate can benefit from the 0% rate if they meet qualifying conditions
• Capital gains from property disposals by businesses are included in taxable income

VAT on Property Transactions

VAT treatment of real estate in the UAE follows specific rules:

• Residential properties: The first supply of a new residential property within 3 years of completion is zero-rated. Subsequent supplies (resales and leases) are exempt from VAT
• Commercial properties: Sale and lease of commercial properties are subject to 5% VAT
• Bare land: The sale of genuinely bare, undeveloped land is exempt from VAT (per FTA Public Clarification VATP002). Land that is partially developed or contains any structure is treated as standard-rated
• Mixed-use properties: Where a property has both residential and commercial elements, the VAT treatment is apportioned accordingly

Impact on Property Investors

For individual property investors, the key takeaway is that personal real estate investments remain largely tax-efficient in the UAE. Under Cabinet Decision No. 49 of 2023, real estate investment income earned by a natural person from the sale, lease, or sub-lease of property in the UAE held in personal capacity (and not requiring a business licence) is outside the scope of Corporate Tax. Investors operating through corporate structures need to plan their position carefully.

Transfer pricing rules under Articles 34-36 of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022) also mean that related-party real estate transactions must be conducted at arm's length, with appropriate documentation.

What Property Owners Should Do

We recommend the following steps for property owners and investors:

• Review your ownership structure to ensure tax efficiency
• Register for VAT if taxable supplies exceed AED 375,000 annually (mandatory) or exceed AED 187,500 (voluntary registration available)
• Maintain proper records of all property transactions
• Consult with a qualified tax advisor for complex portfolios
• Stay updated on FTA clarifications and amendments

How CRE Can Help

At Continental Real Estate, our strategic consultancy team works closely with tax advisors to help clients structure their real estate investments in the most tax-efficient manner. Whether you're a first-time buyer or a seasoned portfolio investor, we ensure you're fully informed about the tax implications of every transaction.