Corporate Tax for Real Estate in the UAE

Corporate tax on UAE real estate follows the owner rather than the asset. The same apartment produces a taxable result in a company and, in most cases, an untaxed one in an individual name.

Three positions. An individual holding personally sits outside corporate tax on real estate investment income where the activity needs no licence. A UAE company or SPV is a taxable person from its first tax period. A free zone entity cannot assume its preferential rate reaches property income.

For a company, the tax base is broader than the rent. Rental income, gains on disposal, management and ancillary income, and service charge recoveries all enter the computation before deductions.

The obligation attaches to the company’s existence, not its activity level. A company formed years ago for a business since wound down, now holding a single unit, is still a taxable person. Both corporate tax registration and filing apply whether or not tax is payable.

Four assumptions cause most of the corrections I see on property files. That personal ownership is always outside the regime, and that a free zone entity carries 0% across to property. That no depreciation is available on a revalued asset, and that a gain built up over a decade is fully taxable on sale.

The individual exclusion is real, and it has an edge

Real estate investment income of a natural person sits outside corporate tax where the activity does not require a licence. It also does not count toward the turnover test that brings individuals into the regime. Rent from a personally held property therefore neither attracts tax nor pushes you closer to a threshold.

Using a managing agent does not change this. The agent handles the tenancy and remits the rent, and the income stays real estate investment income.

The boundary is licensing and the nature of the activity, not the fact that the money is rent. Development, dealing in property and licensed operations are a different question entirely.

The rules for natural persons and the turnover test are covered separately, since that test turns on business activity rather than on property.

A free zone entity does not carry 0% across to property

Income from immovable property is treated separately from ordinary qualifying income. A free zone company holding UAE property should not assume its rate applies to the rent.

The position turns on the type of property and on who the counterparty is, and those two variables can move the answer considerably. It is not a single rule that can be stated once and applied to every holding.

Whether an entity even holds the status in the first place is its own test, set out on our page for the qualifying free zone person.

Fair value accounting used to mean no depreciation deduction

A property carried at fair value under IAS 40 shows no depreciation in the accounts, so there was nothing to deduct. A company using the cost model on an identical asset deducted depreciation every year. Same building, different tax outcome, for an accounting reason alone.

Ministerial Decision No. 173 of 2025 addresses that. It introduces an election giving a deduction at the lower of 4% of original cost per twelve-month tax period, or the tax written down value at the start of the period.

The conditions are specific. The taxable person must be on the accrual basis and must take gains and losses on a realisation basis under Article 20(3). It applies to tax periods beginning on or after 1 January 2025.

It is irrevocable once made. Where it is not made in the return for the first tax period in which the property is held, the right is treated as forfeited.

That last condition is the one that matters most in my practice. Two elections have to be made together, the realisation basis under Article 20(3) and the depreciation election under MD 173, and both belong in the first applicable return. Missing either one closes it.

As an illustration with rounded figures: a company holds an office floor acquired on 1 January 2020 for AED 10,000,000 at fair value. The annual deduction is the lower of 4% of original cost, AED 400,000, and the tax written down value at the start of the period. At 9% that is AED 36,000 a year on the same rental income.

Here is the catch, and it needs saying plainly. On realisation, the aggregate depreciation claimed is added back. This is timing relief, not permanent relief. What it does is move the tax, not remove it, and that is still worth having across a long holding period.

The gain that built up before corporate tax existed

For an asset held long before the regime began, transitional relief can exclude the gain attributable to the earlier period on a later disposal. It sits in Article 61 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 120 of 2023.

On a property bought well before June 2023, this is usually worth more than every deduction in the profit and loss combined. A building held since 2015 and sold now has most of its gain sitting in years the regime did not reach.

More than one method is available and the choice matters. It also depends on an election made in the first return, so an owner who has already filed without considering it should check what was done rather than assume.

Is there an election on your file that closes with this return? Before the return is filed, I can review which elections are open on your property position and which ones close permanently once it is submitted. Book a free consultation.

Five steps, and the order matters because each narrows what the next considers. This is the sequence my own reviews follow.