With the UAE introducing a federal Corporate Tax regime effective from June 1, 2023, every sector is revisiting its financial and compliance strategies—including the real estate sector. Real estate developers, brokerage firms, and property management companies must now assess their tax obligations and ensure full alignment with the new law.
This blog outlines how Corporate Tax applies to real estate developers and brokers, the differences between taxable and exempt activities, and the strategic steps necessary to remain compliant while optimizing tax liabilities.
Need help with Corporate Tax planning for your real estate firm? PEAK Business Consultancy Services offers customized consulting for VAT and Corporate Tax compliance in the UAE’s real estate sector.
Overview of Corporate Tax in the UAE
The UAE Corporate Tax, under Federal Decree-Law No. 47 of 2022, applies to all businesses with taxable income exceeding AED 375,000. A 9% tax rate is imposed on profits above this threshold, with a 0% rate applicable to lower earnings. The law covers entities engaged in commercial, industrial, and professional activities—including those in the real estate domain.
How Real Estate Developers Are Affected
Real estate developers are considered to be engaged in business activity and are fully subject to Corporate Tax. Their income includes profits from residential and commercial property development, off-plan sales, and leasing of newly built units.
Examples of taxable income for developers:
- Revenue from sale of villas, apartments, commercial complexes
- Development and resale of land or plots
- Income from joint ventures and special purpose vehicles (SPVs)
- Income from construction services rendered
Note: Even if projects are executed under separate SPVs or holding structures, they will be consolidated for tax purposes if ownership or economic control criteria are met.
Corporate Tax for Real Estate Brokers
Real estate brokers and agencies operate as service providers facilitating the sale, lease, and management of properties. Their income includes commissions, consulting fees, property management charges, and transaction-related revenue.
Brokerage firms must register for Corporate Tax and file annual tax returns, ensuring that all income is declared and legitimate business expenses are deducted to calculate net taxable income.
PEAK Business Consultancy Services helps brokers with proper tax computation, record keeping, and structuring services to remain compliant and efficient under the UAE Corporate Tax law.
Taxable vs Non-Taxable Real Estate Activities
The Corporate Tax law distinguishes between personal investment activity and commercial real estate operations. This impacts how the tax applies:
- Personal real estate investments: Income from owning and leasing property by individuals (not conducted through a business license) is not subject to Corporate Tax.
- Business activity: Income from property development, sales, and brokerage under a license is taxable.
Example: An individual renting out a family-owned apartment is not taxed. A licensed real estate agency managing properties on behalf of clients is taxed.
Free Zone Real Estate Businesses
Entities operating in Free Zones may be eligible for a 0% tax rate on “qualifying income.” However, they must ensure that:
- They transact only with other Free Zone entities or foreign clients
- They maintain adequate economic substance in the Free Zone
- They do not earn income from UAE mainland unless through a taxable branch
Real estate companies operating across both Free Zones and the mainland should consider forming separate branches or maintaining clear transactional boundaries.
Allowable Deductions and Expenses
Real estate companies can reduce their tax burden by claiming deductions for legitimate business expenses such as:
- Construction and development costs
- Brokerage staff salaries and commissions
- Advertising and listing expenses
- Legal and professional consultancy fees
- Office rent and administrative overheads
Capital expenses such as land acquisition are not deductible, but depreciation on buildings and construction assets may be allowed over time under capital allowance rules.
Transfer Pricing and Related Party Transactions
If your real estate business transacts with related parties (e.g., sister companies, directors, or shareholders), transfer pricing rules apply. These transactions must be conducted at “arm’s length” prices and properly documented to avoid penalties or disallowance of deductions.
PEAK Business Consultancy Services provides support in creating Transfer Pricing files, benchmarking reports, and related party declarations for real estate firms operating in group structures.
Corporate Tax Grouping for Real Estate Groups
Large real estate firms with multiple subsidiaries (development, brokerage, property management) may benefit from forming a Corporate Tax Group, allowing them to:
- File a single tax return
- Offset losses across group entities
- Simplify compliance and reduce inter-company transaction tax implications
However, grouping requires meeting strict ownership and accounting alignment requirements.
Compliance Timeline and Obligations
All taxable real estate entities must:
- Register with the Federal Tax Authority (FTA)
- Maintain proper financial records
- File corporate tax returns within 9 months after the financial year-end
- Comply with audit, transfer pricing, and documentation rules
Late registration or non-compliance can result in administrative penalties and audit exposure.
Conclusion
The UAE Corporate Tax regime is reshaping how real estate developers and brokers structure their businesses, account for profits, and plan their operations. Whether you are a developer launching large projects or a brokerage facilitating transactions, it’s essential to evaluate your tax exposure, restructure where needed, and comply with filing and reporting obligations.
Don’t let tax compliance become a bottleneck to your growth. Work with the experts at PEAK Business Consultancy Services. We provide tailored VAT and Corporate Tax consulting for real estate businesses of all sizes—ensuring compliance, clarity, and cost-efficiency in every step.
Contact PEAK BCS today to secure your tax position and future-proof your real estate ventures in the UAE.
