UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva and Sean Cope, DLA Piper Middle East LLP
otherwise agreed. In practice, it is common for the buyer to pay the full 4% transfer fee. Mortgage Where a mortgage is taken over the property, the mortgage must also be registered. The current applicable mortgage registration fees are (for Abu Dhabi) 0.1% of the mortgaged amount and (for Dubai) 0.25% of the mortgaged amount (up to a maximum of AED1.5 million). Share Deals In Dubai, the DLD requires notification of any changes in shareholding of real estate-owning companies, and a proportionate transfer fee will be applied. Failure to inform the DLD can result in a fine. If the seller is a taxpayer for corporate income tax (CIT) purposes, any gain derived from the sale or divestment of shares will in prin - ciple be subject to tax at a rate of 9%, unless the conditions for the participation exemption regime are met, or unless the seller is eligible for the 0% tax rate under the free zone tax regime. The transfer of shares is typically exempt from VAT. VAT VAT is applied to the sale of real estate assets (discussed in more detail below). CIT Both buyers and sellers should evaluate the tax implications of transactions involving real estate from a CIT perspective. Generally, any income derived from the sale or divestment of real estate assets by juridical persons will be subject to tax at the standard tax rate of 9%. However, under certain circumstances, income from the sale of commercial property could benefit from a 0% CIT rate under the free zone tax regime (sub - ject to meeting the relevant conditions). The UAE CIT regime offers various forms of relief for
intra-group transfers or business restructurings involving real estate, whereby assets can be transferred at book value and no gain is realised by the seller. Individuals who conduct a business or business activity in the UAE will also be subject to CIT if their turnover exceeds AED1 million within a calendar year. However, income that individu - als earn from real estate investments, including profits from selling, leasing, subleasing or renting out land or property, is exempt from CIT. This exemption applies provided these activities do not require a licence or are not conducted through a licence. Additionally, this type of real estate income does not count towards the AED1 million threshold that determines CIT liability for individuals. 2.11 Legal Restrictions on Foreign Investors There are legal restrictions on foreign investors acquiring real estate, as set out in this guide. It is common for the acquisition (or develop - ment) of real estate in the UAE to be financed by obtaining a loan (often with a mortgage as security for repayment). A loan can be provided either on a bilateral basis (single lender provid - ing the entire facility) or on a syndicated or club basis (multiple lenders, each providing parts of the overall facility). Only banks licensed by the UAE Central Bank are eligible to be mortgagees of record for real estate in the UAE. Another popular financing structure in the UAE is through Islamic financing, which has developed 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
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