Corporate Tax on Rental Income in the UAE

There is no separate tax on rent in the UAE; rental income is simply part of taxable income. A company landlord adds its rents to any other income, deducts its property costs, and applies the 0%/9% bands to the result. A natural person landlord is a taxable person too, once the AED 1,000,000 annual turnover threshold for registration is crossed (Cabinet Decision No. 49 of 2023).

The accrual basis catches many landlords out. A full year's rent invoiced in December is December income even if the tenant pays quarterly through the next year, and a rent-free incentive period still produces taxable income measured over the lease. Keeping an Ejari or tenancy-contract register reconciled to the accounts is the practical way to stay accurate.

Start with gross rents receivable for the period, add any forfeited deposits or lease-break fees, then deduct service charges borne by the landlord, maintenance, insurance, management fees and finance costs. Capital improvements are not deducted immediately; they join the asset's cost and are recovered through depreciation.

Taxable income for a property business starts with the accounting profit in its financial statements, adjusted as the Corporate Tax Law requires (Article 20 of Federal Decree-Law No. 47 of 2022). Rental income counts when it is earned under the accounts, not when the cheque clears, so accrued rent and deferred income both matter. Gains on selling investment property are measured against the asset's tax written-down value, and amounts the law disallows, such as fines or private expenses, are added back under Article 33.

Developers face the sharpest timing questions. Under IFRS 15, revenue on an off-plan project may be recognised over time as construction progresses, which means taxable profit can arise before the buyer has paid in full. Brokers, managers and agents are simpler: commission and fee income is recognised when the service is performed, and any rent or deposits that merely pass through their hands are not their revenue at all. Where a landlord charges rent to a connected company, Article 34 requires the transaction to reflect the arm's length market value.

Deductions that matter most for rental income:

• Service charges, chiller fees and municipality housing-related charges borne by the landlord are deductible.
• Letting agent commissions and tenant-finding fees are deductible in the period the tenancy is signed.
• Mortgage interest on the let property is deductible within the Article 30 interest limitation.

Where the landlord and tenant are connected, for example a shareholder renting the company's villa or one group company leasing offices from another, Article 34 requires the rent to be tested against the arm's length market value. A villa rented to the owner's family for AED 60,000 when the market rent is AED 200,000 can be adjusted upwards by the FTA, creating taxable income the landlord never received.

The protection is a short benchmarking file: two or three comparable listings, the Ejari or tenancy terms, and the reason for any discount. The same discipline applies in reverse, where a company pays above-market rent to its owner's building; the excess may be disallowed as not wholly and exclusively for the business.

The recurring mistakes are familiar: charging a connected tenant a friendly rent and forgetting Article 34 lets the FTA substitute market value; mixing the owner's private villa costs into the company; treating refundable deposits as income on receipt; and assuming a free zone licence means 0% tax on rental income, when real estate ownership and management is an excluded activity for Qualifying Free Zone Person purposes (Ministerial Decision No. 229 of 2025). Cash-heavy small operators also trip on record-keeping: every dirham of rent and commission needs an invoice or receipt behind it.

Real estate is the classic case where a free zone licence does not buy the 0% rate. Ministerial Decision No. 229 of 2025 lists ownership or management of real estate as an excluded activity, so a free zone company earning rent or management fees is generally taxed at 9% on that income like a mainland company, provided it is a Qualifying Free Zone Person at all. There is one notable exception: leasing commercial property situated in a free zone to other free zone persons can be qualifying income taxed at 0%.

Brokerage and agency sit in a grey zone that depends on the customer. Earning commission from corporate clients that are themselves free zone persons can be qualifying income; commission from individuals or mainland clients is taxed at 9%. Marketing, consultancy and other services supplied to free zone persons follow the same B2B logic, while anything supplied to natural persons is excluded. The practical step is to segment revenue by customer type in the accounts, because the 0% and 9% portions are computed separately.

Rent from UAE property is UAE-source income wherever the landlord is licensed. A free zone company's rental income from real estate is an excluded activity for Qualifying Free Zone Person purposes (Ministerial Decision No. 229 of 2025), so it is taxed at 9% above the band; only commercial property in a free zone let to other free zone persons can access the 0% rate.

An individual landlord owns four apartments generating AED 480,000 of annual rent. Service charges borne by the landlord are AED 60,000, maintenance AED 25,000, and management fees AED 24,000:

The AED 371,000 sits just inside the 0% band, so no tax is due, but the landlord must still have registered once turnover passed AED 1,000,000 and must file. One more property would push the total over the band and into 9% on the excess.

For help applying these rules to your own business, including registration, computations and filing, contact us for a quote.