Taxation on Rental Income from Commercial Properties in Dubai: What Investors Need to Know 2025

In cities like London, New York and Singapore, high property taxes can eat into rental yields and erode the profitability of real estate investments, especially in the commercial sector. Investors often find themselves bogged down by income tax, capital gains tax and layers of municipal levies that make long-term returns harder to achieve.
But just a six-hour flight away, Dubai offers a refreshing alternative: a tax-friendly environment, stable commercial rental yields and pro-business policies that are attracting global investors in droves. If you’re considering investing in Dubai’s commercial real estate, understanding how rental income is taxed, or more accurately, how little it is could be a game changer.

However, one question frequently arises: How is rental income from commercial properties taxed in Dubai? 

In this article, we break down everything investors need to know about taxation on commercial rental income in Dubai, including applicable laws, exemptions and best practices for compliance.

Taxation on Rental Income from Commercial Properties in Dubai

1. No Personal Income Tax in Dubai

One of the biggest draws of investing in Dubai is its tax-friendly regime. As of now, Dubai does not impose personal income tax on individuals, including rental income from real estate, residential or commercial. This means that if you're an individual investing in commercial property, your rental income is generally tax-free at the personal level.

2. Corporate Taxation on Commercial Rental Income (Effective June 2023)

Although individuals are exempt, corporate entities earning rental income from commercial properties may be subject to corporate tax. Here's how it works:

Key Highlights:

  • Corporate Tax Rate: A 9% corporate tax applies on taxable income exceeding AED 375,000.

  • Applicability: This applies to companies or juridical persons (i.e. LLCs, Free Zone companies) earning income from commercial activities, including rent.

  • Exemption Threshold: The first AED 375,000 of taxable income is exempt to support small businesses.

  • Free Zone Entities: May benefit from a 0% corporate tax if they meet certain conditions and do not conduct business with the mainland.

Tip:

If you're investing through a company structure, consult with a tax advisor to determine your corporate tax obligations based on your licensing jurisdiction and revenue.

3. Value Added Tax (VAT) on Commercial Leases

Unlike residential properties, commercial property leases are subject to 5% VAT in Dubai.

Key Considerations:

  • Tenant Pays VAT: Typically, the tenant bears the VAT on top of the agreed rent.

  • Landlords Must Register: If a landlord’s annual rental income exceeds AED 375,000, they must register for VAT and submit quarterly returns.

  • VAT Deductions: VAT-registered landlords can often recover input VAT on certain expenses related to the property.

Common Scenario:

If you're leasing out a warehouse or office unit and your total rental income is above the VAT threshold, you are required to register with the Federal Tax Authority (FTA) and include VAT in your invoices.

4. Municipality Fees and Service Charges

While there is no direct income tax, Dubai Municipality levies a 10% fee on the rental amount, typically passed on to tenants. Additionally, commercial property owners must account for service charges and maintenance fees, which may impact net rental income.

5. Best Practices for Compliance and Tax Efficiency

To ensure you’re operating within the legal framework and optimising your returns, consider the following:

  • Register for VAT if your rental income exceeds the threshold.

  • Keep detailed financial records for all rental transactions and expenses.

  • Consult a licensed tax advisor or accounting firm for corporate tax planning.

  • Understand your property’s classification whether it's residential or commercial, since taxation rules differ.

  • Stay updated with UAE’s evolving tax laws, especially if you're using a corporate structure or free zone license.

Final Thoughts

Dubai remains one of the most attractive cities in the world for commercial property investment. With no personal income tax, relatively low corporate tax and strong demand across key sectors, investors can enjoy competitive returns when managed correctly.

However, understanding the nuances of rental income taxation on commercial properties is essential to remain compliant and protect your profits. Whether you're leasing out warehouses, office space or retail units, taking the right tax approach ensures sustainable, long-term success.


📌 Looking to invest in Dubai's commercial real estate market?

Our experts at CRC have in-depth market knowledge and can help you navigate not just the property selection process, but also compliance, taxation and investment strategy.
Contact us today for a consultation.


 

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