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Is It True There Are No Property Taxes for Dubai Homes?

While there’s technically no taxes on home sales, there are still fees

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Issam Madkouk / Getty Images
Issam Madkouk / Getty Images

Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.

My husband is moving to Dubai for work, and we're wondering whether to buy a home there. Is it true there’s no property tax in Dubai? What other taxes or fees are assessed on properties there?

"The UAE, of which Dubai is one of seven emirates, does not impose personal taxes—no income taxes, no capital gains taxes and no death taxes," said Mark Nierada, a legal consultant in Dubai who’s also qualified to practice in England and Wales.

Currently, the only direct tax on a real estate purchase is a 4% charge levied at time of sale, based on the value of the transaction, said Andrew Thomson, partner and head of real estate and hospitality for Middle East and Africa at Gowling WLG in Dubai. The buyer and seller are legally supposed to pay 2% each, "but in practice, the buyer pays it," he said.

However, a buyer should also be aware of indirect taxes, costs and fees related to real estate transactions. "These fees and costs fall broadly into three categories—the actual cost of registering and obtaining title, associated costs that may arise if the purchase is funded by a mortgage and, finally, transactional fees to be paid for legal and other advice," Mr. Nierada said.

More:Click to Read Tax Experts Share Answers and Advice for Readers' Pressing Tax Questions

For example, he said, a residence sold for AED 3,700,000 (about US$1 million), would generate tax of AED 148,000 (about US$40,000), payable to the Dubai Land Department. The buyer would also have to pay the department’s fees for a new title deed and to perform the transfer, amounting to AED 4,500 (US$1,225). If the buyer has a mortgage, the department will charge a mortgage registration fee (0.25% of the loan), and mortgage brokers typically charge a 1% mortgage processing fee and a 0.1% valuation fee, Mr. Nierada continued.                                  

Plus, the buyer will pay the real estate broker a 2% commission, and legal fees will typically run about AED 10,000 (US$2,722), Mr. Nierada said.

Although Dubai has no property tax, it does have private community fees exactly like homeowners association fees. This fee is usually calculated on square footage and differs from development to development, depending on the services offered, Mr. Thomson said.

Also, the lack of taxation in Dubai may change next year. "The wind of change is blowing through the Middle East, and with declining oil and gas revenues, VAT [value-added tax] will be imposed for the first time," Mr. Nierada said.

More:Are There Any Tax Advantages for a U.K. Resident to Take Out a Mortgage for a Home in the U.S.?

A value added tax of 5% on a still-to-be finalized range of goods and services is expected to be payable starting Jan. 1, 2018, Mr. Thomson said. But he added that residential property likely won’t be affected.

Overall, "there is no tax reason not to" buy a home in Dubai, Mr. Thomson said. In fact, Mr. Nierada noted, "buying compares favorably to renting. Rents are high so investing has advantages if you are here for anything other than the short-term.

"The main issue with Dubai is [that] the prices fluctuate so greatly based on oil price and global political and economic issues," Mr. Nierada said. "Regional instability strangely has little impact, as this is a safe haven."

Email your questions to editors@mansionglobal.com. Check for answers weekly at www.mansionglobal.com.