Homefront: ‘Do overseas investors pay taxes when they buy a UAE property?’

Buying a property in the emirates does not attract any taxes but consider the liabilities that may apply in your home country

People enjoy their weekend with the view of city skyline and the world tallest tower, Burj Khalifa, in Dubai, United Arab Emirates, Friday, Jan.29, 2021. (AP Photo/Kamran Jebreili)
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I live abroad and have been thinking about buying an investment property in the UAE. I have yet to decide which emirate I will focus on but, at the moment, I am favouring Abu Dhabi, Dubai and Ras Al Khaimah.

I would like to find out more about the taxes property owners pay in the UAE and the costs associated with buying a property.

Are overseas property investors liable for property tax and if so, what percentage of the price is it? Are there any other yearly fees potential buyers need to consider, such as annual maintenance fees, and do they vary in different emirates? DA, France

When buying property in the UAE, there are different fees to consider, depending on the type of property and in which emirate it is located.

For secondary market purchases in Dubai, the fees include the following: a 4 per cent transfer fee, a knowledge fee of Dh580 for an apartment or Dh430 for a land plot or villa, a broker's fee of 2 per cent plus VAT and a trustee registration fee of Dh4,000 plus VAT for property worth Dh500,000 and above or Dh2,000 plus VAT if it is priced below Dh500,000.

For mortgage purchases, the Dubai Land Department registration fee is 0.25 per cent of the loan amount. The finance arrangement fee is typically up to 1 per cent of the loan amount (this can vary) while the property valuation fee is between Dh2,500 to Dh3,500 plus VAT.

For off-plan purchases in Dubai, the transfer fee is 4 per cent but many developers are now offering incentives equal to this amount or waiving it completely.

Legal liabilities applicable in your home country would relate to earnings from rental income or any capital appreciation when selling the property in the future
Mario Volpi

For property purchases in Abu Dhabi, the fees are slightly cheaper. The Abu Dhabi municipality fee, which is the transfer fee, is 2 per cent of the purchase price, the brokerage fee is 2 per cent plus VAT and the title deed cost is Dh1,000.

For mortgage purchases, the mortgage registration fee is 0.1 per cent of the purchase price. The finance arrangement fee is usually up to 1 per cent of the loan amount plus VAT. The bank valuation fees are approximately Dh2,500 to Dh3,000 plus VAT.

Buying a property in the UAE does not attract any taxes. However, as a foreign investor, you must consider the legal liabilities that might be applicable in your home country. These liabilities would relate to earnings from rental income or any capital appreciation when selling the property in the future.

It is, therefore, advisable to seek specific information from tax consultants in France before buying a property in the UAE.

The only other fees to consider, aside from monthly utility bills for water, electricity and cooling charges, would be the annual service fees. These vary greatly depending on the area and property. Details of Dubai service charges can be found on the DLD website or on the Dubai Rest app.

There could also be some membership fees to consider for access to amenities, such as the beach or beach club, in some communities.

I own an apartment in Dubai Marina. My tenant has been complaining about a water leak in the bathroom ceiling. It has been confirmed that the leak is from the apartment above.

The tenant is going on holiday in 10 days but she is not giving us permission to enter the premises. The property company that has my power of attorney is helpless. What can I do? AB, Dubai

The most efficient way to stop any further damage from this water leak is to request the building management to temporarily shut the water supply to the affected apartment.

When your tenant is back from holiday, the problem can be properly investigated, assuming that she will then grant you access.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

Updated: August 12, 2021, 4:00 AM