Dubai: Got a license to offer your properties on short-term rentals? Then, make sure to register for corporate tax.
Do you have properties that you offer on rentals through a holiday home or property management company? Then, whatever you earn is outside the scope of corporate tax.
When the UAE corporate tax regulations came out, individual investors were given freedom from any tax obligations from selling or renting their properties.
The Federal Tax Authority has now provided more clarity on what the situation is when it comes to holding a license to operate holiday homes or short-term rentals.
According to Girish Chand, Senior Partner at MCA Management Consultants, “Individuals with a license to operate holiday homes and earning Dh1 million plus annually come under the corporate tax net.
“A clear distinction has been made between real estate investment income and other business income generated by individuals.
“For instance, an individual selling apartments is clearly not liable for corporate tax as long as no licence is required.
But in case of jointly owned property, the share of income would have to be calculated separately in case their licensed real estate investment is subject to corporate tax.
Assigning a third-party to manage rentals
Clearly, the best way for property owners in the UAE with short-stay rental properties would be to do the leasing through a separate agency. If the property owner signs up a third-party to ‘manage the renting of their apartment and collect rent’, this is ‘still considered as part of a real estate investment activity’, according to the FTA update. And hence not liable for corporate tax.
“This will encourage people to put their properties with companies like ours instead of doing it themselves under a company,” said Anna Skigin, founder and CEO of Frank Porter, which specialises in short-term rentals. “Because these taxes are corporate taxes paid by us and not individual landlords.
There are no personal income taxes in Dubai that would affect individual property owners.
Register for tax
For those individual property owners who prefer to do the renting out for short stays themselves, and retain their license, ‘they have time until March 31, 2025 to register for corporate tax based on their 2024 turnover’, said Chand.
“The tax year for individuals is the calendar year.”
