Dubai Property Tax Explained: Rates, Regulations, and Benefits

Understanding the Property Tax System in Dubai

Yes, Dubai does not impose property tax on property owners - that is the system's foundation. However, costs such as registration fees and service charges could be considered a part of the property tax system in Dubai.

It is essential to familiarise yourself with these costs, whether you are referring to personal or commercial property tax in Dubai. 

For example, a property transfer fee in Dubai costs 4% of the property value. Property owners and tenants are also required to pay an ongoing housing fee, of 5% of the average rental value of the property, which is paid as part of the DEWA bill.

Other costs which could be considered similar to property tax in Dubai include: 

• A security deposit is required for rental properties. This is typically 5% of the annual rent for unfurnished properties, or 10% if the property is furnished.

• Home Insurance costs are an underrated aspect of property tax in Dubai, as many people forget about this. The cost of this varies, depending on the property type, size and area.

• Property service charge is also known as maintenance fees. All property owners in Dubai must pay a predetermined monthly or annual maintenance fee to cover the upkeep of common areas in the community. 

• DEWA (Dubai Electricity and Water Authority) fees are for utilities. Every house owner must register for DEWA to set up their utilities.

Benefits of Dubai’s Property Tax System

What are some of the benefits you can reap as a property owner from the system of property tax in Dubai? Here is a brief list:

• Because there is no property tax, owners have lower overall costs, especially compared to other countries. This allows a higher proportion of rental income to be retained as profit.

• Alongside the lack of property tax in Dubai, transaction costs are usually low. Often, these costs are lower than in other major cities worldwide.

• The Dubai real estate market is thriving, which can make it a great investment choice. Not only do you save money because of no property tax, but you can also earn high rental yields of 5-8%, which are very competitive.

• Dubai doesn’t charge taxes on rental income or capital gains on property investments - which is another benefit for investors.

Common Myths About Dubai Property Taxes

One of the most common myths about property tax in Dubai is that it is high - when in fact, there is no personal income tax, capital gains tax or property tax on residential properties. 

Another common myth is whether commercial property tax in Dubai is high. According to the city’s regulation, company profits may be subject to a corporation tax of 9%, and the sale of commercial properties will be subject to a 5% VAT.

People may also hear that while property tax in Dubai may not be there, the 'hidden charges' are high. While there are costs that have to be considered and budgeted for, they are generally very low by global standards.

Rates & Fees for Property Owners in Dubai

As a property owner, you must know all the fees you will likely pay in Dubai. Here are some of them:

• Property transfer fee: 4% of the property sale price - the main Dubai Land Department fee

• Mortgage registration fee (if applicable): 0.25% of the mortgage amount, plus AED 290

• Municipality fee: Also known as the Dubai housing fee: 5% of the property’s annual rental value 

• Brokerage commission: 2% for residential sales and 5% for rentals

• Value Added Tax (VAT): 5%

• Ejari registration: AED 155 for the Dubai REST app (excluding VAT), AED 219.75 (inclusive of fees and VAT) 

Conclusion

Dubai’s property tax system offers a unique advantage for investors and homeowners, with no direct property tax on residential properties and relatively low associated fees compared to global standards.

Understanding these costs, such as transfer fees, service charges, and housing fees, is essential for making informed decisions. With its thriving real estate market, high rental yields, and tax-free capital gains, Dubai remains an attractive destination for real estate investment.

Whether you want to understand the nuances of the tax system in Dubai or begin your journey as a potential homeowner or investor in the city, Engel & Völkers is here to facilitate your journey. With over 45 years of real estate expertise in the real estate sphere, Engel & Völkers is committed to helping you find your dream property in Dubai.

Get the answer to all your real estate queries with Engel & Völkers Dubai at +971 4 422 3500.