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Expatriate real estate buyers in Dubai have to pay one of the lowest property taxes in the world, reveals a new report.The emirate, where property yields can go as high as 8 per cent per year, has a tax cost of 3.6 per cent of the property price over a five-year period.
While purchasing property as an investment, tax is not necessarily the first concern but it is important because it is often the after-tax return that measures the success of the investment.
Dubai’s tax costs are quite low and are unlikely to change in the near future, but the main source of uncertainty for foreign investors is the potential application of Shariah inheritance rules upon the death of the real estate owner.
It can, however, potentially, be mitigated through the registration of a will with the Dubai International Financial Centre (certain conditions apply) or if the property is acquired through a Dubai offshore company.
The doubling of the transfer fees to four per cent, combined with the introduction of mortgage caps, at end-2013 has helped to moderate demand for residential property in Dubai over the past 18 months.The softening of residential prices in the emirate has provided the authorities with little reason to increase the burden of transaction costs in the near-term.
At four per cent transaction fees in Dubai remain low compared to other markets from which a significant number of residential property buyers originate, including India, Pakistan and the UK – making it an attractive investment destination. Indians, Pakistanis and United Kingdom nationals are the largest property investors with their combined investment running into billions of dirhams.The Dubai land Department also asserted in November 2015 that it was not planning to raise the registration fees.