FTA published a guide explaining corporate tax rules for natural persons engaged in real estate investment

This new guide clarifies how natural persons can benefit from tax exclusions when their real estate activities are deemed personal investments, rather than taxable business income, under Cabinet Decision No. 49 of 2023.

 Key Highlights:
– Definition and Scope: Real estate investment for tax exclusion includes leasing, selling, or sub-leasing properties by individuals, provided these activities don’t require a business license.
– Tax-Exempt Income: The guide specifies that income from personal real estate investments, such as rentals and capital gains from property sales, is generally not subject to corporate tax.
– Thresholds and Licensing Requirements: Natural persons must only register for corporate tax if their business activities surpass an AED 1 million turnover threshold. Real estate income earned without a business license remains outside the scope of corporate tax.
– Arm’s Length Transactions: Transactions with related parties, such as family members, must follow the arm’s length principle to ensure fair tax treatment.
– Jointly Owned Properties: For co-owned real estate, each owner’s share of income may qualify for the exclusion if they do not require a business license.

This guide provides essential clarification for UAE residents on the tax treatment of real estate investments, helping natural persons navigate corporate tax obligations effectively.