Corporate Tax and VAT for Real Estate Businesses in the UAE.

Real estate is one of the few areas where the same rent can be taxed, or not taxed at all, depending on who receives it. For Corporate Tax, the owner matters most. For VAT, the type of building matters most. Getting both right starts with knowing which box you are in.

Owning versus trading property

For a company, there is no special property regime under Corporate Tax. Rental income, gains on sale and the costs of holding property all flow into taxable income. The rate is 0% on the first AED 375,000 of taxable income and 9% above that.

What does differ is how the property sits in the accounts:

• Held to earn rent or for long-term growth. The property is normally an investment property, held on capital account. If you account for it at fair value, the Corporate Tax Law lets you elect the realisation basis, so unrealised revaluation gains and losses are left out of taxable income until the property is sold.
• Held to sell. A developer or trader holding units for sale holds them as trading stock, on revenue account. Profit is taxed as the units are sold.

The choice is driven by what the business actually does, and it affects when profit is taxed. It is worth settling the accounting treatment before the first return, not after.

Rental income for a company

A company landlord includes its rent as ordinary income and deducts expenditure incurred wholly and exclusively for its business, such as maintenance, service charges, agency fees and finance costs, subject to the general deduction rules.

Small Business Relief can still apply. A resident business with revenue of AED 3,000,000 or less, in the current tax period and every earlier one, can elect to be treated as having no taxable income. In August 2026 the Ministry of Finance extended the relief to tax periods ending on or before 31 December 2029.

Individuals: Real Estate Investment income

Natural persons are treated very differently. Under Cabinet Decision No. 49 of 2023, a natural person is only subject to Corporate Tax on business income if their total turnover from business activities exceeds AED 1,000,000 in a calendar year. Income from Real Estate Investment is not counted as business income at all, whatever the amount.

Real Estate Investment means selling, leasing, sub-leasing or renting land or property that is not conducted, and does not need to be conducted, through a licence from a licensing authority. The FTA guide on this topic makes several practical points:

• No size limit. The number, size or value of properties does not matter, provided the definition is met.
• Tenancy registrations are not licences. Registering a lease on Ejari in Dubai or Tawtheeq in Abu Dhabi is an administrative record, not a licence to conduct business.
• A licence changes everything. If the activity is conducted through a licence, for example a holiday home licence, or needs one but it has not been obtained, the income is business income and counts towards the AED 1,000,000 test.
• Services are not investment. Income from services related to property, such as property management, is not Real Estate Investment income.

VAT: residential versus commercial

The FTA's Real Estate VAT Guide summarises the treatment:

Supply	VAT treatment
First supply of a new residential building, by sale or lease, within 3 years of completion	Zero-rated (0%)
Later supplies of residential property	Exempt
Commercial property, sale or lease	Standard-rated (5%)
Bare land	Exempt

Zero-rating the first residential supply lets a developer recover the VAT on construction costs. An exempt supply is different: VAT on related costs, such as agent fees or upkeep after the first supply, cannot be recovered.

Commercial property is anything that is not residential, bare land or a charitable building, so offices, shops and warehouses are standard-rated. When a commercial property is sold by anyone other than its developer, the buyer pays the VAT directly to the FTA before the Land Department completes the transfer.

Brokers' commission

An estate agent's services are treated as services connected with real estate, so they are supplied where the property is. For a UAE property, a VAT-registered broker's commission is a taxable supply, and the FTA gives 5% as the default rate for agency services in the UAE.

For the person paying the commission, recovery depends on the property. A landlord letting commercial space can generally recover the VAT. A landlord letting an existing apartment, which is exempt, cannot. For Corporate Tax, a brokerage is an ordinary business, and commission is taxable income.

A worked example

"Our company owns a warehouse let for AED 2,500,000 a year and four apartments let for AED 1,000,000 in total. The apartments were first let years ago. Our deductible costs are AED 1,500,000."

• Corporate Tax. Revenue is AED 3,500,000, above the Small Business Relief limit. Taxable income is AED 2,000,000. Tax is 9% of the AED 1,625,000 above AED 375,000, which is AED 146,250.
• VAT. The warehouse rent is standard-rated, so the company charges AED 125,000 of VAT to the tenant. The apartment rent is exempt. VAT on costs that relate only to the apartments cannot be recovered, and VAT on shared costs is apportioned.

Now suppose the same four apartments were owned by a director personally, without a licence. The AED 1,000,000 of rent would be Real Estate Investment income, outside Corporate Tax regardless of the amount, and the rent would still be exempt from VAT.

Keeping the records straight

Property businesses need a clear split between residential and commercial income, and between exempt and taxable costs, to get both the VAT return and the Corporate Tax return right. Monthly bookkeeping that tags each unit and each cost makes that split much easier to defend.

How we help

We keep property clients' books by unit, prepare their VAT returns with the residential and commercial split and any input tax apportionment, file their Corporate Tax returns, and report income and costs by property so owners can see what each one earns.

Frequently asked questions

Is rental income from my own apartments subject to UAE Corporate Tax?

Not if you own them as an individual and the letting is not conducted, and does not need to be conducted, through a licence. Cabinet Decision No. 49 of 2023 treats that as Real Estate Investment income, which is outside Corporate Tax regardless of the amount.

Does a company pay Corporate Tax on rent?

Yes. The Real Estate Investment exclusion is for natural persons only. A company's rental income and property gains form part of its taxable income in the normal way.

Is VAT charged on residential rent?

The first supply of a new residential building within three years of completion, by sale or lease, is zero-rated. Supplies after that, including most ordinary residential leases, are exempt.

Do brokers charge VAT on commission?

Estate agents' services are treated as services connected with real estate, supplied where the property is. For UAE property, a VAT-registered broker's commission is a taxable supply, and the FTA's default rate for agency services in the UAE is 5%.