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November 7, 2024
Taxes and Fees For Property Purchases in UAE
The question is circulating in the market: is there property tax in Dubai. There is no property tax in Dubai when you buy real estate. You just need to pay a 4% transfer fee and registration fees. But if you rent out your property and earn more than AED 375,000 per year, you are required to pay a 5% VAT on the rental income. Earning less than that doesn’t require any VAT. As long as property developers are concerned, they are required to pay 9% tax on business profits over AED 375,000. It looks like although Dubai has started to add some new taxes, like a corporate tax to help the economy grow, it still remains one of the best places for investors in real estate. We’ll talk about real estate tax in Dubai in detail.
Why Should You Buy Real Estate in Dubai?
Before we go into details of the question, is there property tax in Dubai, let’s quickly take a look at why Dubai’s real estate market now.
Good Return on Investment
Dubai gives better returns on investment (ROI) than other big cities like Hong Kong, London, and New York. Investors can expect rental profits between 6% and 10%, especially in the best locations. This is much higher than in other major cities around the world.
Long-Term Residency
If you invest 2 million dirhams or more in property, you can get the UAE’s Golden Visa. This visa lets you live in the UAE for up to 10 years. It offers security and the chance to live in one of the safest and most exciting cities in the world.
Top Standard of Living and Safety
Dubai is famous for its modern cities, like the tall buildings in Dubai and the calm areas in Al Ain. The UAE has one of the lowest crime rates in the world, thanks to advanced technology that helps respond quickly to safety problems. Living in Dubai is very comfortable, which makes it a great place for people to live and for investors to put their money.
Ever-Evolving Investment Opportunities
Dubai has amazing buildings like the Burj Khalifa and Palm Jumeirah that attract many visitors and investors from other countries. The city’s economy is growing quickly, and the government is investing a lot in new projects, making it a great place for real estate investments. Property prices in Dubai are expected to keep going up, which is good news for investors looking to gain value from their properties.
Taxes and Fees for Property Purchases in Dubai
Dubai’s real estate market is open and friendly for investors. Below you get a list of main taxes and fees and everything you need to know about real estate tax in Dubai.
Property Transfer and Registration Fees
In Dubai, when you buy a property, there is a fee of 4% of the property’s value that needs to be paid. This fee is usually shared equally between the buyer and the seller. Besides the transfer fee, there are also other costs for paperwork and registration that must be taken into account.
- DLD (Dubai Land Department) Fee: 4% of the property value.
- AED 430 for land
- AED 40 for off-plan properties
- AED 580 for apartments and offices
- Property Registration Fee:
- Properties valued below AED 500,000: AED 2,000 + 5% VAT
- Properties valued above AED 500,000: AED 4,000 + 5% VAT
- Title Deed Issuance Fee: AED 250
- Agent’s Commission: 2% of the property value.
Mortgage-Related Fees
For first-time buyers, there’s a mortgage cap of 80% of the property’s value, meaning you must make a minimum deposit of 20%. For higher-value properties or second-time buyers, this deposit increases to 40%. Mortgage arrangement is 0.25% of the loan amount plus an additional AED 290 as an administration fee. It comes along with a little No Objection Certificate (NOC) fees
Fees When Selling Property in Dubai
When selling property in Dubai, you don’t have to pay taxes. However, there are some fees that you need to pay. The seller usually pays half of the transfer fee, which is 2% of the sale price. There is also a Municipal Rental Tax of 5%, and this will be included in the rent bill. Additionally, sellers may have to pay some extra fees to the Dubai Land Department (DLD) for things like registering the property and getting the title deed.
Value Added Tax (VAT) on Property Purchases
In Dubai, you usually do not have to pay VAT (Value Added Tax) on residential properties. However, if you buy a hotel apartment directly from a developer for the first time, you will need to pay a 5% VAT. The broker, who works under RERA (Real Estate Regulatory Agency), usually collects this amount, which can be 10% or more of the total cost of your purchase. While you don’t pay VAT on the 4% DLD (Dubai Land Department) registration fees, VAT does apply to the fees for the broker and the trustee office.
Property Valuation Fees
When getting a mortgage, the fees usually cost between AED 2,500 and AED 3,500. The exact amount depends on how much the property is worth and how complicated the valuation is.
Rental Income and Property Tax in Dubai
As you know there are no taxes when you buy a property, but if you rent out your property, there are some fees and taxes. If you make more than AED 375,000 from rent each year, you must register for VAT, which is a 5% tax. If you make less than this amount, there is no VAT. Tenants have to pay a housing fee, which is usually 5% of the total rent for the year. This fee is added to their monthly utility bills.
Corporate Tax on Property Developers
In 2023, the UAE started a new tax of 9% on business profits that are more than AED 375,000. This tax affects property developers and people who own many investment properties and make a lot of money from rent. The goal of this tax is to help the UAE have more ways to earn money while keeping the economy strong and stable.
Conclusion
Now you know what to say when someone asks you “is there property tax in Dubai?” There are no property taxes and people don’t pay VAT on homes. It’s important to know about the costs involved when you buy a property, whether it’s your first time or you want to add more to your collection. Talking to a real estate expert or a lawyer at GJ properties can help you understand the market better and make the buying process easier.
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