Taxability of Real Estate Investment Income Earned by Natural Person

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Taxability of real estate income involves the taxation of earnings from property investments, including rental income and capital gains. Understanding these tax rules helps investors manage their tax obligations and financial outcomes effectively.

𝗖𝗮𝘀𝗲 𝗜. 𝗠𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗼𝗳 𝗥𝗲𝘀𝗶𝗱𝗲𝗻𝘁𝗶𝗮𝗹 𝗣𝗿𝗼𝗽𝗲𝗿𝘁𝗶𝗲𝘀  
A natural person, Mr. M, based in the UAE, owns residential apartments with an annual rental income of AED 2,500,000. Mr. M appoints Company C (unrelated to Mr. M) to manage the properties and collect the rent from tenants for a fee. 

Given that Company C only manages the properties and collects the rent for Mr. M, the money received from Company C by Mr. M is Real Estate Investment income and not taxable . 
 
𝗖𝗮𝘀𝗲 𝗜𝗜. 𝗠𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗼𝗳 𝗿𝗲𝘀𝗶𝗱𝗲𝗻𝘁𝗶𝗮𝗹 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝗶𝗲𝘀- 𝘀𝗶𝗻𝗴𝗹𝗲 𝗼𝘄𝗻𝗲𝗿 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 
A natural person, Mr. X, based in the UAE, owns residential apartments together with his wife and children with an annual rental income of AED 2,000,000. Mr. X sets up a Company H (owning 100% of the shares with his wife and children )to manage the properties and collect the rent from tenants for a fee. 
 
Given that Company H just manages the properties and collects the rent for Mr. X and Company H is a separate legal entity. 

The money received from Company H by Mr. X is Real Estate Investment income and not taxable . As Mr. X owns (with his wife and children) Company H, the fees charged by Company H to Mr. X needs to be at arm's length. 
 
𝗖𝗮𝘀𝗲 𝗹𝗹𝗹. 𝗦𝗲𝗹𝗳 𝗼𝘄𝗻𝗲𝗱 𝗶𝗺𝗺𝗼𝘃𝗮𝗯𝗹𝗲 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝗶𝗲𝘀  
A natural person, Mr. P owns several real estate properties in both Abu Dhabi and Dubai and conducts no other business Mr. P has created a sole proprietorship to manage self-owned properties. 

As Mr. P holds a license to manage his real-estate, the rental income will not be classified as Real Estate Investment income, and will be subject to Corporate Tax at a rate of 9% if the AED 1 million turnover threshold is exceeded. 
 
𝗖𝗮𝘀𝗲 𝗹𝗩:- 𝗘𝗮𝗿𝗻𝗶𝗻𝗴 𝗿𝗲𝗻𝘁𝗮𝗹 𝗶𝗻𝗰𝗼𝗺𝗲  
A natural person, Mrs. N, based in the UAE, owns several properties located in the UAE and rents them out for AED 1,200,000 per Gregorian calendar year. Mrs. N also has a Licence to run her Bakery Business in Sharjah. 

As long as the real estate activity is not required to be conducted through a Licence from a Licensing Authority, the income derived by Mrs. N from the rental properties is not subject to Corporate Tax as the income is Real Estate Investment income.

However, the income from the Bakery Business could be subject to Corporate Tax if the AED 1 million turnover threshold is met in a Gregorian calendar year as of 1 January 2024. 

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