The municipality fee for living in a villa or apartment in Abu Dhabi has been set at 5 per cent.
The charge is an increase on the previous 3 per cent - but lower than the 7.5 per cent which was considered for villas in recent weeks.
Initially, the Abu Dhabi Distribution Company (ADDC), which collects the fee, outlined a charge of 5 per cent for apartments and 7.5 per cent for villas.
The charge was first announced in February 2016 and was originally 3 per cent of the value of a property’s annual rental contract. Last month the Executive Council approved a plan to increase the charge.
A municipality employee also confirmed the new charge and said the fee would be backdated to May.
Owners in particular will benefit, said Ben Crompton, managing partner of Crompton Partners.
“People don’t really understand that these taxes are more likely to fall on the owners of the property in terms of rent reductions,” he said.
“If there is going to more tax on renting a villa, then villas will be harder to rent. I’m not an economist, but you would imagine that the rent would come down by the same amount that the fee is being charged at.”
He said it is good news for UAE nationals as they own the bulk of villas in the city.
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“Levelling them up with apartments makes sense and brings it into line with what the fee is in Dubai, which is 5 per cent on residential rents,” said Mr Crompton.
He said many of the people looking to move were worried about the increase.
It could have been because municipality costs are higher for villas because they require more landscaping, refuse collection, pavement and road maintenance, said Mr Crompton.
“It’s good news for tenants and landlords that they are now the same for apartments and villas. Obviously they would have preferred not to have the hike from 3 per cent to 5 per cent, but much better 5 per cent than 7.5 per cent,” he added.
The new charge represents a significant saving to tenants of villas.
People renting a Dh200,000 a year villa will now pay Dh833.33 a month at the new rate, as opposed to Dh1,250 a month at 7.5 per cent.
The charge is among a series of fees and taxes introduced in the UAE over the past year, including a 100 per tax on cigarettes, a 50 per cent charge on energy drinks and a 30 per cent tax on alcohol sold in off-licences in the capital. In addition, a 5 per cent VAT charge has been applied on most daily goods and services since January 1.
However, rent is continuing to fall across the capital, after dropping by up to 10 per cent last year. Market experts predict that the rate will slow as oil prices stabilise and government spending increases.
Emiratis, homeowners and government employees whose rent is paid by the department or agency for which they work are exempt from paying the municipality fee.