Thinking about buying property in Dubai? You're probably wondering about taxes and what financial obligations come with property ownership. The good news is that Dubai's tax system is very easy to understand and is one of the most investor-friendly property markets compared to most major cities around the world.
Whether you're a first-time buyer looking for your dream home or an experienced investor expanding your portfolio, understanding the tax implications of your purchase is crucial for making informed decisions.
Throughout this article, we will list the main taxes you need to be aware of when buying property in Dubai so that you can make strategic decisions that align with your goals.
Unlike London, New York, or Toronto, Dubai does not have annual property taxes, which means that once you own your property, you won't receive a yearly bill just for being a homeowner, which is one of the biggest advantages of investing in Dubai real estate and a major reason why the UAE attracts investors from around the globe.
However, "no annual property tax" doesn't mean there are no costs at all. Let's break down what you actually need to pay.
As mentioned before, Dubai doesn't burden you with recurring annual property taxes, but there are several one-time fees you'll need to pay when completing your property purchase. These costs are transparent, easy to calculate, and paid only once during the transaction process.
Understanding these fees upfront will help you prepare your budget accurately and avoid any surprises at closing. Let's break down each of these costs:
When you purchase a property in Dubai, you'll pay a one-time transfer fee of 4% of the property's purchase price to the Dubai Land Department. This fee covers the administrative costs of registering the property under your name and officially transferring the ownership from the seller or the developer to you.
For example, if the property price is AED 1,000,000, then the Dubai Land Department (DLD) transfer fee will be AED 40,000 (4%)
Kindly note that this amount is paid once at the time of purchase and is never paid again, regardless of how long you own the property.
Beyond the main transfer fee, you'll pay a registration fee to get your property officially recorded in your name. This administrative fee ranges from AED 2,000 to AED 4,000, depending on the property's value. This ensures you receive your title deed and that your ownership is properly documented with the authorities.
During the transaction process, you'll need to place a security deposit of approximately 10% of the purchase price. This deposit is held by either the DLD trustee office or your real estate broker until the property transfer is completed. Once all documentation is finalized and ownership is transferred, this deposit goes toward your total purchase amount.
If you're working with a real estate agent, expect to pay a commission of approximately 2% of the property value (plus VAT). This can be negotiated and may vary from one agency or broker to another, but if you buy directly from a trusted developer, such as Binghatti, no commission will be paid, as you will be dealing directly with the developer, and no other third parties will be involved in the transaction.
If you're taking out a mortgage to finance your property purchase, there are additional one-time costs to add to your budget, such as:
Banks charge a processing fee for setting up your mortgage, typically around 1% of the loan amount plus 5% VAT. This covers the administrative work of evaluating your application, processing documentation, and arranging the loan.
For example, if you take a loan of AED 750,000, there will be an arrangement fee of AED 7,500 (1%), and VAT will also be applied, so the total fee will be AED 7,875.
Before approving your mortgage, the bank will need to assess the property's market value, and this process will cost between AED 2,500 and AED 3,500 plus VAT.
Once your mortgage is approved, it must be registered with the Dubai Land Department, and this registration fee is approximately 0.25% of the loan amount, used to create an official record of the mortgage against your property.
Value Added Tax (VAT) in the UAE is currently set at 5%. However, its application to property purchases depends on the type of transaction:
When you buy a property directly from a developer for the first time, the sale is exempt from VAT. This applies to:
When you buy a property on the secondary market (resale from another owner), the transaction is also generally VAT-exempt for residential properties. Commercial property transactions may be subject to VAT depending on the circumstances.
No, rental income in Dubai is not subject to tax. Whether you're a UAE national or a foreign investor, you can earn rental income from your Dubai property without paying taxes on that income.
While not taxes, these ongoing costs are part of property ownership in Dubai:
Service Charges: Annual maintenance fees for common areas.
DEWA (Utilities): Electricity and water connection fees and ongoing utility bills.
Ejari Registration:A small annual fee (around AED 220) to register your tenancy contract with the Real Estate Regulatory Agency (RERA).
Dubai's property tax framework offers several advantages, including but not limited to:
Dubai's property tax structure stands out as one of the most attractive in the world for real estate investors, as it has no annual property taxes, no rental income tax, no capital gains tax, and also the financial benefits are clear and compelling.
Ready to start your investment journey? Contact Binghatti today by calling +971 80015, and one of our real estate consultants will guide you through your purchase journey.
