Is There A Property Tax In Dubai?

One of the biggest attractions for both private buyers and property investors is that there is no property tax in Dubai. That's a significant incentive to purchase property in one of the world's most dynamic cities. Add to that a high standard of living, excellent employment opportunities, and property developments that truly emphasise community living, and you have a very desirable proposition.

However, before you jump at the chance to buy tax-free property in Dubai, you need to understand the ins and outs of buying and selling property in the Emirates, as well as the hidden costs of owning property in Dubai. Let’s take a closer look at the rules and regulations, and the additional fees and charges you may encounter if you buy property in Dubai. 

Understanding Property Tax Rules in Dubai

Dubai really stands out as one of the most relaxed locations in the world when it comes to property tax. There is no annual property tax placed on residential property owners, nor is there any rental income tax or capital gains tax charged in Dubai.

Because the country's wealth is based on its substantial gas and oil reserves, it relies on these to fund the development of infrastructure and to maintain public services to an exceptionally high standard. Consequently, there is no requirement to tax homeowners on their property, allowing investors to retain a significant portion of the returns on their property investments. 

This is why Dubai’s property tax law makes the city so attractive to investors looking to build up a substantial property portfolio.

Are There Annual Property Taxes for Homeowners in Dubai?

Dubai does not charge annual property taxes on homeowners in Dubai, whether you’re a Dubai National or an expat who has made Dubai their new home. This lack of annual property taxes in Dubai makes both buying and owning a home more affordable, which is why developments in Freehold Zones (where expats can own freehold property) are so popular.

However, while there are no property taxes, there are other charges levied when you’re buying and selling property. And everyone, regardless of residential or immigration status, has to pay these. Buyers and owners should budget for one-time DLD transfer fees, trustee/admin fees, possible mortgage registration fees, annual service charges, and the Dubai Municipality Housing Fee. Let’s look at some of those charges in more detail.

One-Time Fees and Charges When Buying Property

The Dubai Land Department (DLD) charges fixed amounts for registering a property in a new name and for property transfer processing. These are the main charges you will need to pay when you buy a property. The DLD’s fees amount to 4% of the purchase price. In addition, you will have to pay between AED 2,000 and AED 4,000, as well as 5% VAT for the Trustee Office fee, depending on the purchase price.

You will also need to pay a mortgage registration fee of 0.25% and a small fee if you’ve taken out a loan to make your purchase. Then, legal and documentation costs need to be factored in – it costs around AED 250 for a Title Deed to be drawn up.

Other costs to consider and factor into your purchase price include agent and brokerage fees, which are usually 2% of the purchase price plus 5% VAT, and a conveyance fee that can be between AED 5,000 and AED 10,000 to ensure all documentation and transfers adhere to UAE law.

Your bank or lender will also charge mortgage-related fees, including arrangement fees of around 1% of the loan amount, property valuation fees, and fees for a No Objection Certificate that will cost anything from AED 500 to AED 5,000.

Ongoing Costs: Service Charges and Maintenance Fees Explained

While there’s no property tax, Dubai levies a Municipality Housing Fee (often called “housing charge”). For tenants it’s 5% of annual rent, collected monthly via DEWA. Owners also pay it - typically based on the property’s assessed rental value. It’s not a property tax per se but it is a recurring charge.

There are also ongoing charges and annual property fees in Dubai that cover services and maintenance. These will depend on what is included in your property. These are annual fees and are calculated per square foot of the property. They are intended to cover things such as general maintenance of communal areas, including corridors, elevators and lobbies, security services, utilities in shared spaces, landscaping and waste management (including pest control). 

They also cover building insurance and management fees for the Owner's Association. The amount you pay will depend significantly on the location of your property in Dubai and its type. It's essential to get a full breakdown of annual charges before you consider buying, as they can mount up very quickly and represent a considerable outlay when added to your initial purchase costs.

Why Dubai’s Tax-Free Property Market Attracts Foreign Investors

Despite all those additional costs, Dubai's tax-free property market remains very attractive to foreign investors, primarily because of the reason we mentioned earlier, investors can keep more of their profits. The outlay initially can be higher than you think. But the long-term benefits of creating a Dubai property portfolio, especially when you factor in the increase in value and the high demand for property, are extremely tempting.

Find out why buying property in Dubai is so exciting by touring the Ghaf Woods experience either online or in person. With some of the most exciting new developments taking place in the Emirates and fantastic opportunities for Dubai real estate investment, which can boost your portfolio, Ghaf Woods represents the next stage in Dubai's growth. Find out more here or contact us for details on our current developments.