Introduction of Corporate Tax and its impact on the Real Estate sector


The UAE Ministry of Finance (MoF) announced the introduction of Federal Corporate Tax (CT) that will be effective for financial years starting on or after June 1, 2023. The Federal Tax Authority (FTA) further explained that the CT will be calculated annually and applied on profits made by businesses, including companies involved in Real Estate Management, Construction, Real Estate Development, Real Estate Agencies, and Real Estate brokerage activities.

“With a base tax of 9% and a 0% rate on profits of up to AED 375,000 ($ 102,000) to support start-ups and small businesses; the new Federal Corporate Tax System is positioned as internationally competitive.” Said the MoF in an official statement.

As far as the Real Estate sector is concerned,  the Residential real estate sector has not been affected by VAT, as 85% of the components of the real estate industry are not subject to the rate imposed. Whether under construction or in display and sold for the first time within three years of its construction, the real estate developer will be entitled to recover the tax he paid for goods and services to suppliers during the construction process.

Investments in real estate by individuals have also been exempted from the corporate tax if the buyers are not required to obtain a commercial license or permit to engage the space for commercial practices in the country.

However, it remains to be seen whether the new taxation laws turn around to prove as an additional competitive advantage that’ll support investments in the real estate sector in the future. Will the real estate market react to this tax this year in terms of sales, especially since the tax will be applied next year? It’s a matter of time to experience how it incentivizes the Real Estate segment to cement UAE’s position as a world-leading hub for business and investment. 

Attracting attention from investors, businesses, and authorities alike, the announcement of Corporate Tax is right now a point of discussion across board rooms. This strategic move that’s also internationally competitive will enhance transparency, credibility and is suitably aligned with the country’s vision to become a platform of choice where businesses thrive. The laws and taxes imposed by the Government are inclusive of benefits directed towards citizens, residents, and visitors alike to further enhance its reputation. With a boost to the economy, it shall now attract new investors and in turn accelerate the demand for real estate leading to recovery.

In addition to the Corporate Tax, VAT revenues will also contribute to financial sustainability and provide a new source of income ensuring a continuous provision of world-class government services in the future.

Further details on the new tax system will be announced by June 2022 to allocate adequate time for businesses to understand and ensure implementation and compliance with the new tax policies.

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