UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
2.9 Condemnation, Expropriation or Compulsory Purchase Expropriation of land is possible in both Abu Dhabi and Dubai. The UAE Constitution and Civil Code, however, restrict the right of a public authority to expropriate land, unless such expro - priation is for a public benefit and compensation will be paid to the party being disadvantaged by such expropriation. There is no formal statutory process, although typically for large-scale expropriations a com - mittee will be formed to co-ordinate dealings with affected parties and to determine compen - sation. 2.10 Taxes Applicable to a Transaction Asset Deals In Abu Dhabi, the seller and buyer are required to pay registration fees of between 1% and 4% of the purchase price. It is common for the buyer to pay the transfer fee. In Dubai, the seller and buyer are required to pay registration fees of 4% of the purchase price, which are split equally between the parties unless otherwise agreed. In practice, it is com - mon for the buyer to pay the full 4% transfer fee. If the seller is a taxpayer for corporate income tax (CIT) purposes, a potential capital gain derived from the transfer of assets (calculated as the difference between the transfer value and the acquisition value) will be taxable for CIT at the standard rate of 9%. The applicable CIT regulations also foresee cer - tain reliefs (eg, Business Restructuring Relief/ Qualifying Group Relief) which, if certain require - ments are met, may be useful for deferring the taxation of a potential capital gain.
The transfer of assets will typically be consid - ered a taxable supply for VAT purposes at a standard rate of 5%. However, if the transfer is part of a sale of a business as a going concern, such transfer could remain outside of the scope of VAT. The application of the VAT regulations needs to be assessed on a case-by-case basis. Mortgage Where a mortgage is taken out on the property, the mortgage must also be registered. The appli - cable 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 to the DLD, and a proportionate transfer fee will be applied. Failure to inform can result in a fine. If the seller is a taxpayer for CIT purposes, any gain derived from the sale or divestment of shares will in principle be subject to tax at the standard rate (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 in 8.1 VAT and Sales Tax ). CIT Both buyers and sellers should evaluate the tax implications of transactions involving real estate
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