Commercial Real Estate in the United Arab Emirates: Overview

The Q&A gives a high-level overview of real estate investment structures; restrictions on foreign ownership; title; tenure; sale of real estate; real estate tax; real estate finance; leases; and planning law in the United Arab Emirates.


This Q&A is part of the global guide to corporate real estate law.

Corporate Tax Registration Deadline: Have you registered?

With the first UAE corporate tax registration deadline looming (31 May 2024), companies and other businesses need to ensure that they have checked their deadline to register as a taxable person.


The registration process under the Federal Law No. (47) 2022 (CT Law) is still new to the UAE and 2024 marks the first mandatory year for companies to register with the Federal Tax Authority (FTA) as a taxable person. Since this is the first year for such registration, companies and individuals (where applicable) should be aware that additional requirements (documents and/or fees) may be requested from the FTA following submission of the company’s registration via the EmaraTax portal (Portal).


When evaluating whether one has an obligation to register for corporate tax, a prudent question that arises is whether or not you are captured under the CT Law provisions as a taxable person. To the extent that the answer to this question is yes, you will then need to look at whether you are required to register. In the majority of cases, if the answer to the first question is yes, the answer to the second question will also be yes, save for certain automatic exemptions, which we have discussed below.


Am I a taxable person?


i) Individuals


CT Law shall apply to natural persons engaged in a business or business activities in the UAE. This will include sole establishments or proprietorships and individual partners in an unincorporated partnership conducting business in the UAE. As a general rule, whether an individual is engaged in a business that is subject to CT will depend on whether the activity requires a commercial license or equivalent permit from the relevant competent authority.


ii) Companies, Partnerships and other Legal persons


CT Law shall apply to UAE companies, partnerships and other legal persons incorporated in the UAE, as well as to foreign legal entities that have a permanent establishment in the UAE or that earn UAE-sourced income.


For the application of CT Law, legal persons incorporated in a foreign jurisdiction that are effectively managed and controlled in the UAE will be treated as if they are UAE-incorporated entities.


Limited and general partnerships and other unincorporated joint ventures and associations of persons will be treated as ‘transparent’ for corporate tax purposes, meaning, the income generated from such establishments will ‘flow through’ and be taxed in the hands of the partners or members only.


I am a taxable person; do I need to register?


UAE branches of domestic companies are considered an extension of their ‘parent’ or ‘head office’ and are therefore not considered separate legal entities and are not required to separately register or file for UAE corporate tax. However, the parent and/or head office of the UAE branch is required to register.


In contrast, UAE branches of foreign businesses likely will be required to register via the Portal, on the basis that the income earned shall be included and deemed taxable income. It is notable that such entities may be eligible to apply for certain corporate tax exemptions and we can advise on this further on a case-by-case basis. However, such tax exemptions do not negate the requirement for these entities to register as a taxable person under the CT Law.


Freezone companies, that are engaged in business or business activities in the UAE, must register via the Portal, even if they are eligible to apply for, and avail certain exemptions in relation to corporate tax liability.


Foreign individuals may also be required to register via the Portal as a taxable person should they undertake a licensed business activity within the UAE. However, it should be noted that wages earned by individuals are not taxable, therefore, a foreign individual (being a natural person) shall not need to register via the Portal as a taxable person if they are earning an employment wage in the UAE.


What if I don’t register?


The current fine for failing to register as a taxable person within the specified deadline is AED 10,000.


In its latest reports, the FTA conducted 40,000 inspection visits in local markets across all emirates in the UAE in 2023, marking an 80% increase from 2022. This intensified supervisory effort is aimed at combatting tax evasion and promoting tax compliance. Therefore, companies, businesses and individuals should be aware that although corporate tax is new to the UAE, the authorities are taking a firm approach to ensuring compliance.


Do I still have to register if exemptions apply?


Under CT Law a company and or an individual undertaking a business activity or business must register whether or not that entity may be eligible for certain tax exemptions unless an exemption already applies. Please refer to below.


So, who should not register?


Companies who may not need to register pursuant to the current guidance released by the FTA are as follows:


Government Entinty

Automatically exempt unless conducting a business or business activity under a license as issued by licensing authority.

Government Controlled Entity

Exempt if the entity carries out ‘Mandated Activities’ (an activity conducted by a company directly or indirectly wholly owned and controlled by Federal, Local Government, ministries, governmental departments, agencies, and/or public institutions). Otherwise, shall be subject to corporate tax if conducting a business or business activity under a license as issued by licensing authority.

Extractive Business

May not be required to register unless they conduct a business which is within the scope of corporate tax.

Non-Extractive Natural Resource Business

May not be required to register unless they conduct a business which is within the scope of corporate tax.


What if an automatic exemption doesn’t apply to a company?


Should a company not fall into one of the above automatic exemption categories, then the company must register via the Portal (whether established or not in a freezone) and following such registration, may apply for an applicable tax exemption from being subject to corporate tax on the company’s earnings. These tax exemptions include but are not limited to:


– Qualifying Freezone company, undertaking a qualifying activity, earning qualifying income;


– Qualifying public benefit entities, including but not limited to charities; and


– Public and private pension/social security funds.


Additional tax exemptions may assist in resulting in a lower or zero percent tax rate:


– Permanent Establishment rules


– Foreign Permanent Establishment rules


– Double Taxation agreements


What about individuals?


Individuals once again shall need to register if they undertake a business or business activity. Notwithstanding this, individuals shall not be taxed and therefore shall not need to register for corporate tax where the income is generated as a result of the following:


– Wages earned from a company, including income earned as compensation for duties carried out as an executive on a board.


– Personal Investment Income: for example; where an individual uses personal savings, invests into a listed company, and earns income from the investment, this shall not be deemed a taxable income. In this context, the individual will not need to register.


– Real Estate Income: being income earned from rental income or the sale of a property.


However, although certain income may be taxable, individuals may be eligible for certain tax exemptions and may avail a more favourable corporate tax rate of zero percent benefiting from applicable exemptions (to be evaluated following registration) such as:


– Turnover threshold;


– Withholding Tax rate; and/or


– Exempt income.




Afridi & Angell advises international and domestic clients with respect to corporate tax structuring, corporate tax exemptions/reliefs, coordination with taxes paid abroad/foreign tax credits, compliance and registration. ■

The Unprecedented Rains and Floods in the UAE – Who is responsible for all of the damage?

Over a period of less than 24 hours on the 16th of April, the United Arab Emirates experienced its heaviest rainfall since records began 75 years ago, with sources recording a years’ worth of rain falling in one day. The record-breaking rains created destructive flooding and chaos. Properties in the UAE were under attack by natural elements – rain, wind and flood. Many suffered from severe flooding, rising groundwater, and water through the walls and windows as well as through roofs. Whilst many parts of the UAE have now returned to normal, there are a number of neighbourhoods such as the Mudon development in Dubai which are still under water, including numerous luxury properties. Further rains and floods are also predicted for the next few days. Pricing for UAE real estate has now added another factor which will determine real estate valuation: the capability to withstand/susceptibility to rain, wind and flood (elevation, drainage, access, waterproofing).


But who do owners turn to? Who is at fault and liable for such repairs? Many homeowners do not have insurance. Can homeowners look to developers, master developers and building management companies for responsibility? Some developers have already stated that they will cover all costs necessary to repair communities affected by the flooding, including addressing any structural damage, restoring affected properties, and any additional restoration works. But is this a gesture of goodwill, or are they obligated to do so?


Are Developers responsible?


Developer’s liability – Article 40 of Law No. (6) of 2019 Concerning the Jointly Owned Real Property Ownership (JOP Law):


Article 40 (a) – Developers remain liable for a period of 10 years from the date of the completion certificate of the project being issued for structural defects.


Article 40 (b) – Developers remain liable for a period of one year from the date of the handover of the unit to the owner for repairing or replacing defective installations, including mechanical, electrical, sanitary and sewerage installations and other similar installations.


Owners may (subject to the time limitation period) be able to rely on the one-year and 10-year warranties as provided under the JOP Law. Owners/buyers should also check what if any, other warranties were provided to them on completion by the Developer. Owners may be able to hold developers liable for failure to comply with building construction and maintenance standards, including lack of sufficient and/or enough sump pumps for drainage.


In turn, developers may be able to rely on warranties provided to them by master developers, contractors and architects. Developers may rely upon the UAE Civil Code, Articles 880-883 and the ‘Decennial Liability’ period, which consists of a 10-year liability period for structural defects. The developer may hold the architect and contractors liable for structural defects, and potentially towards wider design defects.


Are Master Developers responsible?


With owners paying service charges to master developers for community services, there are obligations owed by the master developers to these owners. Questions arise regarding the proper design and maintenance of properties and surrounding community areas, including infrastructure such as roads and drainage.


Are Building Management companies responsible?


Article 18 of JOP Law:


For most real estate properties/developments, either the developer, or an appointed management company shall manage, operate and maintain the community, and where applicable common areas of the property. Such maintenance includes sewerage and drainage.


Article 41 of JOP Law:


Management companies and developers must also ensure that they have sufficient insurance in place to cover maintenance and reconstruction, in case of fire, damage or destruction for any reason whatsoever, and owners, contribute towards the insurance premiums through their service charges.


Developers, master developers, architects, engineers and contractors will argue that the rain and the floods were a force majeure event and that they cannot be responsible for an act of God. But what if the design or maintenance is not up to standard and damage would have been far less had it been designed or maintained properly? What if the developers, master developers, building managers, architects or engineers did not abide by their obligations under the law which caused or partially contributed to the damage suffered by real estate owners? What about those owners who had already raised concerns with regard to leaks during heavy rainfalls, sewerage and drainage issues but nothing had been done to address those concerns? The above considerations regarding developers’, master developers’, building management companies’, architects’, engineers’ and contractors’ liabilities are relevant in determining who may be responsible for paying for some or all of the damage. Who is liable and who pays will be the next major consideration in this saga.


With the April 16th unprecedented rainfall and floods, many have called for changes in the current construction and development requirements of projects including the increase and improvement of sewerage and drainage systems. The government has already announced as part of the Dubai Economic Agenda D33, that it has pledged AED 80 billion towards a new and updated sewerage system. The government has been fast to react by stating that developers and building management companies should restore and repair properties and communities at no additional costs, and where needed, assist with alternative housing, pest control and additional security. Master developers and developers will need to carefully consider whether they should be investing in better drainage in their relevant developments. The question will continue to be whether this cost should be borne by the owners, and if so, will owners see a future hike in their service charges?

Weathering the April Storms: Where will the burden fall under UAE law?

When TS Eliot wrote in 1922 that “April is the cruellest month” he likely never envisaged extreme weather of the proportions experienced in the UAE on the 16th of April 2024.  What, then, of the parties to a contract?  Ought they to have foreseen this and catered for it in the terms of their agreement? And how should the inevitable losses caused be allocated between them under UAE law?  As the UAE continues its recovery, contracting parties across all commercial sectors will likely be considering these questions very carefully.


The starting point, as always, will be the terms of the contract itself.  However, in the absence of the parties reaching an agreement as to what these require, Article 249 of the UAE Civil Code will undoubtedly feature prominently in any dispute. Article 249 provides (in translation) as follows:


“If exceptional circumstances of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighing up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.”


James Whelan, writing in the Ministry of Justice’s Commentary on the UAE Civil Code, regards this provision as an exception to the general rule that it is not the function of the judge to create or vary contracts on behalf of the parties and states that the UAE legislature has restricted its application to cases of “unforeseen emergencies”.


The application of Article 249 of the UAE Civil Code is conditional upon the occurrence of an “exceptional emergency (or event) of a public nature” that could not have been foreseen at the time the contract was formed, and which renders performance of the obligation in question burdensome or onerous, but not impossible.  An event of a “public” nature means that it affects the entire industry or economy rather than a particular venture or project. Al Sanhouri offers useful examples of what may constitute “exceptional emergencies” such as earthquakes, wars or an epidemic, and floods are specifically included on this list.


In UAE law, “exceptional emergencies of a public nature” for the purposes of Article 249 are to be contrasted with “force majeure events” as stated in Article 273 of the UAE Civil Code.  Whereas force majeure events render the performance of an obligation impossible and result in the termination of the obligation, “unforeseen emergencies of a public nature” render the performance of contractual obligations onerous and excessive … without reaching the level of impossibility” and “result only in the reduction of the obligation to a reasonable level and the consequences are thus borne by the obligee and the obligor”.


Article 249 is a mandatory provision which UAE law precludes contracting out of.  Parties to contracts governed by UAE law will therefore need to consider, honestly and realistically, the impact of the April Storms on the performance of their own and each other’s obligations to determine whether (and, if so, to what extent) Articles 249 and 273 might apply.


Obligors tempted to argue that Article 249 applies and that the performance of an obligation that has become more onerous should consequently be reduced by the court to a more reasonable level will need to remember that an increased burden of itself is insufficient: performance must carry with it the threat of “grave loss” before the principle bites.


Similarly, it would obviously be tempting for an obligee, seeking to resist an application under Article 249, to attempt to argue that the relevant event was foreseen (or was at least of a type that could or ought to have been foreseen) and that therefore the judicial discretion is simply not engaged.  To contend, for example, that even if this particular storm was not foreseen at the time the contract was formed the contract already speaks to what happens in the event of extreme adverse weather in general and therefore the parties can be taken to have envisaged these sorts of circumstances.


However, these arguments would not only be contrary to both the letter and the spirit of the Code itself but are also at odds with the relevant principle of Islamic Shariah law (Udur) from which Article 249 is derived.


Article 249 is engaged when, despite the circumstances, the terms of the contract prima facie continue to require performance by the obligor but this would cause him grave loss.  Even if a contract contains terms specifying how the risk of extreme weather events is to be borne, Article 249 enables the Court to step in and “reduce the oppressive obligation to a reasonable level if justice so requires”, and any agreement to the contrary shall be void.


The dispute resolution team at Afridi & Angell practices in English and Arabic, and is well-equipped to advise on bringing and defending Article 249 applications across the full range of commercial sectors in litigations and arbitrations both onshore and offshore. ■

Insurance claims for damage caused by the torrential rain and floods

Early last week, the UAE experienced its most severe rainfall in the past 75 years. A large number of homes and business premises across the UAE suffered damage from the effects of the rain or floods, including the many motor vehicles that were stalled or otherwise impaired.


Those who are covered by home insurance policies may, depending on the terms of the policy, ordinarily expect to be compensated for the cost of repairs or replacement for certain types of damage including: (a) structural damage caused to premises and damage to the plumbing or electrical systems; and (b) damage to contents such as personal belongings, furniture, and electronic appliances. Businesses covered under property all risk and business interruption (PAR & BI) may, depending on the terms of the policy, ordinarily expect to be covered for the cost of repair or replacement of the damages as well as the loss suffered due to the interruption in business.


Careful review of the terms and conditions of a policy is essential in order to assess the extent, limits, and exclusions, applicable under the coverage of the policy.


Policyholders intending to submit a claim under a home insurance or PAR & BI policy should in the ordinary course:


(a) gather clear and contemporaneous evidence of the damage suffered and the exact cause(s) of such damage;


(b) take necessary measures to mitigate the damage, ideally with prior notice to the insurer providing sufficient details;


(c) inform and obtain prior approval from the insurer if there is a necessity to repair the damage pending the submission or approval of a claim;


(d) record and retain evidence of all costs incurred in the process of repairing the damage;


(e) be mindful that insurers may reject claims if steps taken by policyholders result in worsening the damage; and


(f) submit all claims to the insurer as expeditiously as possible following the claims procedure stipulated in the policy.


Dispute resolution


Insurance policies will generally be governed by Federal Decree Law No. 48 of 2023 On the Regulation of Insurance Activities (the Insurance Law). Pursuant to Article 101 (2) of the Insurance Law, if a dispute arises relating to an insurance claim, a complaint must be submitted to the Banking and Insurance Dispute Resolution Unit (BIDRU) instituted pursuant to Article 121 of Federal Decree Law No. 14 of 2018 (the Old Insurance Law). BIDRU is now known as the “Sanadak”. In terms of Article 2 of the Central Bank’s Regulation on the Establishment of an Ombudsman Unit for the United Arab Emirates (the Sanadak Regulation), the principal mandate of “Sanadak” is “to receive, handle, review and resolve Complaints in a thorough, timely, transparent, fair and legally sound manner.” Submitting a complaint to “Sanadak” is now the mandatory first step in any dispute concerning an insurance policy, and is a cost-effective option for policyholders who are dissatisfied with the manner in which an insurer has responded to a claim.


Determinations made by “Sanadak” concerning insurance disputes may be appealed to the Insurance Dispute Resolution Committee (IDRC) within 30 days from the issuance of the determination. In terms of Article 101 (5) of the Insurance Law, an insurer may not appeal decisions of the IDRC if the value in dispute does not exceed AED 50,000: such decisions are deemed final and enforceable immediately upon issuance. Where the value exceeds AED 50,000, the insurer may appeal the decision before the Court of Appeal within 30 days from the date of its issuance or when the insurer became aware of it. The insured may appeal a decision of the IDRC, before the Court of Appeal, irrespective of the claim value, within 30 days from the date of issuance of the decision or when the insured became aware of it.


Lastly, it is important to be mindful that “Sanadak” will not have jurisdiction over a complaint where the insurance policy provides for an alternative forum for dispute resolution. Article 7 (6) of the Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies issued by the Insurance Authority pursuant to Board Resolution No. 3 of 2010 permits non-compulsory insurance policies to incorporate arbitration clauses. Apart from this, Article 2 (2) of the Insurance Law also provides that its provisions shall not apply to companies operating in Financial Free Zones i.e., the Dubai International Financial Centre and the Abu Dhabi Global Market.


Although the Sanadak mechanism came into existence quite recently, Afridi & Angell has assisted clients to make claims on this platform, which has been an efficient online service. The dispute resolution team at Afridi & Angell is well-equipped to advise on disputes arising out of insurance claims. ■

Capital Gains Tax Increase: Impact on Planning

The Canadian federal budget was tabled on 16 April 2024. It included, among other things, a proposal to increase the capital gains inclusion rate for the first time since 2001, from one half to two thirds, with the increase coming into effect for dispositions (or deemed dispositions) occurring on or after 25 June 2024 (and for individuals, the increase applies to capital gains over CAD 250,000 in any year, with capital gains below that amount remaining subject to the existing 50 percent inclusion rate).


Taxable capital gains (or losses) are realized when a Canadian resident sells a capital asset outside of a registered plan or qualifying insurance policy, and subject to some exemptions (e.g. lifetime capital gains exemption, principal residence exemption, reductions of inclusion rate on charitable donations). It is a common goal in Canadian tax planning to characterize as much personal and corporate income as possible as capital gains rather than other forms of income, because of the 50 percent inclusion rate (the other 50 percent being received tax free). Such planning will remain relevant as long as the capital gains inclusion rate is less than 100 percent; however, the increase to the inclusion rate will erode the benefit of doing so.


Examples of events or transactions which will be impacted by the increase include corporate surplus stripping transactions (which aim to extract corporate surplus as capital gains rather than dividends), estate freezes, taxes on death, and taxes on becoming non-resident of Canada. In addition, many professionals in Canada practice their profession through a professional corporation and accumulate and invest their savings in those corporations, virtually always pursuing a capital growth strategy because dividend income is taxed aggressively. The increase will impact the taxation of capital gains realized in those corporations.


Canadians may wish to consider deliberately triggering accrued capital gains prior to 25 June 2024 while the existing 50 percent inclusion rate is still applicable. This could entail crystalizing gains in investment accounts, carrying out an estate freeze, making lifetime gifts of capital property to family members or charities, or expediting plans to become non-resident of Canada (which triggers a deemed disposition of certain capital property upon exit).


Individuals with intentions to accumulate investment assets in private corporations and who would have otherwise planned to invest and grow their wealth in the corporation may now find that investing in corporate-owned life insurance is comparatively more attractive as well.  Such policies and their in-policy growth continue to be tax-sheltered, and their comparatively conservative investment returns (versus unrestricted investment accounts) are less of a disadvantage in view of the higher capital gains inclusion rate.


Details of how the capital gains inclusion rate increase will be administered have not yet been released, particularly with respect to which transactions will be deemed to fall before and after 25 June 2024, and with respect to the inclusion rate for capital losses. It appears from the initial budget release that there will be an effort to match the inclusion rate for capital losses to capital gains at the same rate, likely to forestall triggering gains at the lower rate and losses at the higher rate on the same type of asset, such as public securities.


If you would like to pursue transactions to take advantage of the current 50 percent capital gains inclusion rate prior to 25 June 2024, or discuss becoming non-resident of Canada and related planning, please contact us and we will be glad to assist. ■

DIFC Court of Appeal to revisit its jurisdiction to grant freezing orders in support of foreign proceedings

On 2 April 2024, the DIFC Court of Appeal granted permission to appeal to determine whether the recent case of Sandra Holding [2023] DIFC CA 003 (6 September 2023) was wrongly decided. Permission was granted to appeal on the question of:


“…whether the rulings of the Court of Appeal in Sandra Holding with respect to the jurisdiction of the Court to make freezing orders in support of pending foreign proceedings should not be followed because:


(a)        [They] were per incuriam; and/or


(b)        They were wrong.”


In Sandra Holding, the Court of Appeal held that the DIFC Court does not have jurisdiction to grant a freezing order in support of proceedings which are pending before a foreign court unless it has jurisdiction over the defendant under Article 5A(1)(a) to (e) of the Judicial Authority Law (JAL).


The appeal arises from a judgment of the DIFC Court of First Instance which held (when determining an application to set aside a freezing order) that it was bound by the decision of Sandra Holding. The Court of First Instance, while allowing the defendant’s set-aside application, stayed the operation or effect of the set-aside application and granted permission to appeal its own decision on the following grounds:


1 – The meaning and effect [of] paragraph 99 of the decision of the Court of Appeal in Sandra Holding.


2 – Whether the rulings of the Court of Appeal in Sandra Holding with respect to the jurisdiction of the Court to make freezing orders in support of pending foreign proceedings were obiter dicta and therefore not binding on judges at first instance.


The Court of First Instance also granted the claimant leave to apply to the Court of Appeal for permission to appeal on the additional ground as to whether Sandra Holding was wrongly decided and/or per incuriam.


Justice Sir Peter Gross, in his reasons for granting permission, noted that a number of important policy issues arise from the appeal:


  • “The power of the DIFC Courts, established (inter alia) to assist international trade, to grant freezing orders in circumstances where such relief could be crucial to avoid the dissipation of assets.


  • The need to guard against the assertion by the DIFC Courts of an exorbitant jurisdiction.


  • The proper limits of judicial (as distinct from legislative) development of the law by the DIFC Courts, whose jurisdiction is based on statute.”


Justice Sir Peter Gross also highlighted the potential general importance of the appeal to the jurisdiction and jurisprudence of the DIFC Courts, together with the development of DIFC law in this area, as reasons for granting permission to appeal and directed that the Court would benefit from considering comparative common law authorities on the relevant points.


The Court of Appeal will now hear the appeal on all grounds for which permission has been granted, and will also consider (arguably for the first time) whether it is open to the Court of Appeal to revisit and, if so minded, depart from its own previous decisions.


Afridi & Angell acts for the Claimant-Appellant in the proceedings. ■

Venture Capital (UAE chapter), Lexology Panoramic

Historically venture capital has not played a large role in financing markets in the United Arab Emirates (UAE), however this is changing rapidly. Venture capital and venture capital funds are increasingly becoming an integral part of the UAE’s corporate finance landscape. The importance of venture capital is expected to continue to grow in the coming years.