Property Taxes in Abu Dhabi
Property taxes in Abu Dhabi are subject to a legislative system that distinguishes between different property categories, tax rates, exemptions, and incentives to be applied to each, aiming to strike a balance between investor interests and the national economy.What are the key features of the tax system applied to the real estate sector in the emirate? And which categories benefit from tax exemptions? This is what we will delve into with some detail in this article prepared by the Realty Zone team. Keep reading or more details…
Exemptions and Incentives | Property Taxes in Abu Dhabi
The Abu Dhabi government places significant emphasis on encouraging investment in residential real estate development by granting numerous incentives and benefits to developers. This helps reduce production costs and positively impacts the selling or renting prices of these units for investors.
What properties are exempt from value-added tax in Abu Dhabi?
Several types of properties enjoy complete exemption from value-added tax (VAT) in the emirate of Abu Dhabi, whether upon sale or rental. Among the most notable are:
- Undeveloped bare lands.
- Residential properties, such as apartments, villas, and housing complexes.
- Leased commercial properties, like offices and shops.
- Buildings converted from commercial to residential use.
Owners of buildings converted into residential units are entitled to reclaim the VAT related to the expenses incurred for supplying the building within three years of completing the construction of the residential units.
Which properties are subject to value-added tax in Abu Dhabi?
Several types of properties in the emirate of Abu Dhabi are subject to a 5% value-added tax (VAT) upon their transactions, whether through sale or rent.Properties subject to tax include non-leased commercial properties as well as units sold off-plan. Additional services related to the real estate sector, such as brokerage, management, and property appraisal services, are subject to 5% VAT. Dual-use buildings: residential/commercialIn the case of buildings serving dual purposes (residential/commercial), the initial sale or lease of the residential section incurs a 0% VAT rate, while subsequent supplies are exempt from tax.Conversely, 5% VAT applies to all transactions involving the commercial segment of these buildings. This distinction arises from the residential portion being categorized as tax-exempt residential properties, while the commercial part falls under the 5% VAT bracket upon any supply.
Corporate Tax | Property Taxes in Abu Dhabi
This tax is applied to profits generated from real estate transactions in Abu Dhabi, targeting companies holding a commercial license or operating within the UAE. The corporate tax rate stands at 9% for income exceeding 375,000 dirhams.Investors in the real estate sector benefit from their investment returns not being subject to this tax, as long as their investment activity is in a personal capacity rather than through corporate entities. For instance, revenues from renting personally owned residential apartments or profits from the sale of personal properties are not subject to this tax, as these are considered non-commercial investments.This setup provides an additional incentive to attract more real estate investments in Abu Dhabi’s local market.
Prospects for real estate investment growth in light of tax incentives
Without a doubt, the existing investment landscape in Abu Dhabi, coupled with tax incentives and exemptions across multiple sectors, notably the real estate market, will substantially enhance investor trust and cement the emirate’s status as a premier hub for real estate investments.The real estate sector remains a pivotal force in fostering broad-based economic growth for the emirate. In 2022, it accounted for over 137 billion dirhams of the non-oil GDP, constituting 23% of the total contribution from other sectors, which amounted to 457 billion dirhams.
In conclusion
Abu Dhabi’s tax policy notably encourages real estate investment, with most property types exempt from taxes, aiming to stimulate the real estate market.Abu Dhabi’s focus on attracting companies and individual investors is evident through the imposition of low tax rates on commercial properties and the exemption of personal real estate investments from corporate tax. This tax approach mirrors the emirate’s future economic vision, where the real estate sector stands as a fundamental pillar in economic growth.Should you seek further information regarding property taxes in Abu Dhabi, do not hesitate to reach out to the Realty Zone team for a free real estate consultation.Alternatively, if you are considering purchasing property in Abu Dhabi’s prime freehold areas, contact us now to explore a wide array of luxurious properties and select the one that best suits your needs.
Edited by: Realty Zone©
Source:
