UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva and Sean Cope, DLA Piper Middle East LLP
In practice, a building completion certificate from the relevant municipality (following inspec - tions of the works by the relevant authorities and civil defence) is usually stipulated as a contrac - tual requirement before construction works can be used and occupied.
In Dubai, a municipality fee applies on the occu - pation of property, and this is calculated as 5% of the annual rent or 0.05% of the value of the property (in the case of ownership). Value is gen - erally treated as the amount for which the current occupier bought the property. 8.4 Income Tax Withholding for Foreign Investors Income earned from immovable property in the UAE by foreign individual investors, who are considered UAE taxpayers based on the criteria provided in 2.10 Taxes Applicable to a Transac- tion , is currently not subject to any withholding tax in the UAE, as the rate is set at 0%. However, it is important to note that this rate might change in the future. Foreign legal entities that derive income from immovable property in the UAE will be consid - ered to have a nexus in the UAE. Non-resident persons that have a nexus in the UAE are required to register for corporate income purposes. 8.5 Tax Benefits Under the new UAE CIT regime, no specific rules have been introduced to date regarding depreci - ation deductions for real estate. However, in the absence of specific rules governing the depre - ciation of real estate assets, for tax purposes depreciation rules will default to the guidelines set out under applicable accounting standards (ie, the International Financial Reporting Stand - ards).
8. Tax 8.1 VAT and Sales Tax
Since 1 January 2018, VAT at the standard rate (5%) applies to the sale of commercial property (whether such property is newly constructed or not). If the transaction can be treated as a “trans - fer of a going concern”, the transfer shall not be considered a supply for VAT purposes (hence no VAT will arise). The conditions for obtaining this treatment could be complex and require appro - priate legal analysis. 8.2 Mitigation of Tax Liability No methods are currently used to mitigate trans - fer, recordation, stamp or other similar tax liabil - ity on acquisitions of large real estate portfolios. For CIT, various forms of business restructur - ing relief are available. These types of relief can significantly reduce the tax impact of intra-group transfers or transfers of a business (or an inde - In Abu Dhabi, a municipality fee applies to any - one leasing property, except UAE nationals. Fees are calculated at 5% of the rent (with a minimum of AED450), which is paid to the Abu Dhabi Distribution Company (ADDC) or Al Ain Distribution Company (AADC) on behalf of the DMT, in addition to water and electricity bills. Registration for the fees occurs automatically when the lease is registered with Tawtheeq. pendent part thereof). 8.3 Municipal Taxes
1055 CHAMBERS.COM
Powered by FlippingBook