UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
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 2.1 Catego- ries of Property Rights .
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 devel - oped in accordance with Sharia principles. A key principle is that the payment and receipt of interest (riba) is prohibited and any obligation to pay interest is considered void. However, Islamic principles do not prohibit a financier in an Islamic finance transaction from making a profit, rental or other return on its asset or investment. Existing real estate may be financed through sale and leaseback arrangements (ijara), whereby the borrower sells the property to the Islamic financi - er and subsequently leases it back in exchange for paying rentals. However, this kind of arrange - ment may attract registration and other costs, potentially making a leasing or ijara structure economically unviable. Commodity murabaha (tawaruq) financing struc - tures rely on underlying commodities trades in order to create debt-based obligations (like a conventional loan). This structure does not involve additional transfers and can also be structured on a bilateral or syndicated basis in the same way as for a conventional loan. A com - modity murabaha structure can also be secured using a mortgage over the underlying real estate. Other Financing Structures There is a general trend towards the establish - ment of real estate investment funds/real estate investment trusts (REITs) whereby stakeholders inject capital into a fund, where the principal
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
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
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