UAE Rental Income Guide

Rental Income — 100% Tax-Free for Individuals

• No personal income tax on rental income: The UAE does not impose any personal income tax. The rental income from the residential or the commercial properties received by an individual is 100% tax-free. There is no tax on the rent, no tax on the rental profits, and no tax on the capital appreciation.
• No reporting requirement: The individuals receiving the rental income do not need to report the rental income to the Federal Tax Authority (the "FTA"). There is no rental income schedule, no tax return, and no disclosure requirement for the personal rental income.
• Corporate rental income — 9%: If the property is held through a UAE-registered company (the "corporate landlord"), the rental income is subject to the corporate tax at 9% (above AED 375,000). The corporate landlord may deduct the expenses (the "mortgage interest, the repairs, the management fees") against the rental income.
• Real estate investment trusts (REITs): The UAE-listed REITs (the "Dubai Islamic Bank REIT", the "Emirates REIT", the "Al Mal REIT") distribute the rental income to the unitholders. The distributions are tax-free for the individual unitholders. The REIT itself is subject to the corporate tax at 9% on the retained earnings.

5% VAT on Commercial Rents Only

• Residential rent — VAT exempt: The residential rental property (the "apartments, the villas, the residential buildings") is exempt from VAT. The landlord does not charge VAT on the residential rent and cannot recover the input VAT on the related costs (the "maintenance, the utilities, the agency fees").
• Commercial rent — 5% VAT: The commercial rental property (the "offices, the shops, the warehouses, the factories") is subject to the 5% VAT. The commercial landlord must charge the VAT on the rent and remit it to the FTA through the quarterly VAT return.
• Mixed-use properties: If the property has both the residential and the commercial components (e.g. a building with the shops on the ground floor and the apartments above), the VAT treatment is apportioned. The residential portion is exempt, the commercial portion is subject to 5% VAT.
• VAT registration threshold: The landlord must register for the VAT if the annual taxable supplies (the "commercial rent plus the other taxable income") exceed AED 375,000. The voluntary registration is possible from AED 187,500.

Real Estate Transfer Fee — 2-4% on Purchase

• Dubai — 4% (+ AED 580 admin fee): The Dubai Land Department (the "DLD") charges a 4% transfer fee on the property purchase price. The fee is typically split 50/50 between the buyer and the seller (2% each), but the market practice varies. The additional administrative fee of AED 580 applies for the registration.
• Abu Dhabi — 2%: The Abu Dhabi Department of Municipalities and Transport (the "DMT") charges a 2% transfer fee on the property purchase price. The fee is usually paid by the buyer. The additional registration fee of AED 500 to AED 1,000 applies.
• Sharjah and the other emirates: The transfer fee in Sharjah is 2% (up to AED 10,000 cap). In Ajman and Ras Al Khaimah, the transfer fee is 2% to 3%. In Fujairah, the transfer fee is 2%. The exact rates may vary by the specific area within each emirate.
• Off-plan purchases: The transfer fee on the off-plan properties (the "properties purchased directly from the developer") is typically 0% to 1% for the initial registration (the "Oqood fee" in Dubai) and the full 4% upon the final transfer of the title deed.

Ejari Registration

• Mandatory registration: The "Ejari" (the "My Rent" in Arabic) is the mandatory tenancy registration system in Dubai. All the residential and the commercial tenancy contracts in Dubai must be registered on the Ejari system through the "Dubai Land Department" (the "DLD") or the approved "Ejari typing centres".
• Registration process: The landlord or the tenant registers the tenancy contract on the Ejari system. The required documents include: the tenancy contract (signed by both parties), the Emirates ID copies, the title deed copy (for the landlord), and the DEWA (the "Dubai Electricity and Water Authority") connection certificate.
• Importance: The Ejari registration is required for: (a) the DEWA connection (the "utility setup"), (b) the tenant's visa renewal (the "tenancy contract as the proof of address"), (c) the dispute resolution at the "Rental Dispute Settlement Centre" (the "RDSC"), (d) the rent index calculation.
• Rent index: The Dubai Land Department publishes the "Rent Index" based on the Ejari data. The index determines the "maximum rent increase" for the existing tenancies (the RERA Rent Increase Calculator). The index is updated annually.

FAQs

Do I need to pay tax on the rental income from my Dubai apartment?

No. The UAE does not impose any personal income tax or rental income tax. The rental income from your Dubai apartment is 100% tax-free. You do not need to file any tax return or make any disclosure to the FTA for the personal rental income.

Is the commercial rent subject to VAT?

Yes. The commercial rent is subject to the 5% VAT. The commercial landlord must charge the VAT on the rent and file the VAT returns quarterly. The commercial tenant (the business) may recover the VAT on the rent as the input VAT, subject to the VAT recovery rules.

Who pays the real estate transfer fee in Dubai?

The 4% transfer fee at the Dubai Land Department is typically split 50/50 between the buyer and the seller (2% each). However, the market practice varies — in the strong seller's market, the buyer may pay the full 4%. The parties should agree on the split in the "Memorandum of Understanding" (the "MOU") before the transfer.