Owning UAE real estate through a corporate vehicle: All you need to know

The UAE real estate market is among the most dynamic and lucrative in the world. At a time when other markets around the world are experiencing downturns due to economic uncertainties, property demand in the UAE continues to rise.

With an influx of new residents and businesses along with policy reforms and infrastructure developments, the market has gone from strength to strength.

In fact, in 2023 alone, Dubai recorded an impressive 56 per cent rise in real estate sales transactions, for a total value of Dhs411.74bn.

Similarly, Abu Dhabi saw a 75 per cent increase in transactions over the same period.

While many of these investors purchase privately as individuals, few are aware of the option to own real estate through a corporate vehicle and the benefits it brings.

Read: Global HNWIs ready to spend $408.3m on residential real estate in Abu Dhabi, reveals report

Why purchase UAE real estate through a company?

Real estate ownership through a corporate entity offers several important benefits over purchasing as an individual, especially when it comes to financial efficiency and legal protection.

Tax is a good example. While there’s no personal income tax in the UAE, VAT does apply in certain real estate transactions, so using a company as the purchasing vehicle means you can manage VAT more effectively, reclaiming VAT paid on business-related expenses like professional fees for real estate agents and legal advisors, marketing expenses, and maintenance costs.

Using a corporate structure also allows you to pool expenses related to property management, maintenance and utilities.

These can be treated as business expenses, offering financial efficiencies in terms of cash flow management within the company.

But, perhaps the biggest benefit of property ownership as a company is in asset management and liability protection. Any real estate assets owned by a corporation are legally separated from the personal assets of the owners which means an extra layer of protection against personal financial risk if the owner is involved in any legal disputes or has financial difficulties.

This legal separation isn’t only useful for protecting personal wealth, it also helps with investment scaling. For investors looking to expand their operations and buy multiple properties, holding them all under a corporate umbrella may make it easier to manage and can reduce operational costs through bulk handling and efficiencies: a big help when handling a growing real estate portfolio.

What types of companies can hold properties in the UAE?

In Dubai, the ability of a company to own property is closely tied to its ownership structure and whether it is locally or foreign-owned.

Companies entirely owned by UAE or GCC nationals are more flexible in that they can acquire property anywhere in Dubai, holding it through freehold, long lease, or usufruct rights for up to 99 years. On the other hand, foreign-owned companies face more restrictions and can only purchase property in specific areas approved by the Dubai Land Department (DLD).

The list of approved areas for foreign investment in Dubai is regularly updated to reflect changing regulations and market trends. While not extensive, it includes some of the most desirable locations such as Dubai Marina, Downtown Dubai, Palm Jumeirah, Jumeirah Lakes Towers (JLT), and Jumeirah Beach Residence (JBR), among others.

The updates also aim to expand the options available and make the market more inclusive for foreign investors.

Typically, in free zones, companies are allowed to own property within their designated zones and certain areas authorised by local real estate authorities.

Onshore companies registered as LLCs, on the other hand, have broader options and can purchase real estate in many designated areas across the Emirates, provided they comply with local laws.

This does, however, mean that companies registered onshore in foreign jurisdictions must first establish a UAE presence through a branch or rep office to get the necessary licences and permits.

Specialised structures

Other specialised entities such as real estate investment trusts (REITs) and holding companies can also be used for property ownership and investment and offer operational efficiencies that individual or non-specialised company structures can’t.

For example, a holding company registered in one of the three approved jurisdictions: Dubai International Financial Centre (DIFC), Jebel Ali Free Zone (JAFZA), or Ras Al Khaimah International Corporate Centre (RAKICC) offers benefits like tax exemptions and privacy and also asset protection for estate and inheritance planning.

As the two main offshore jurisdictions, RAKICC and JAFZA are effective ways to manage international real estate holdings. However, Before incorporating, it’s important to verify with potential banks whether they will accept your chosen corporate structure.

Some banks have issues with offshore companies, so it’s important to check before you incorporate. This will help prevent roadblocks in accessing banking services later on.

DIFC is also often favoured for investments for its common law legislation and the allowance for different share classes.

Holding companies can also be used with other estate planning structures like trusts and foundations either in the UAE or abroad.

Foundations in Dubai are a unique legal structure mainly used by wealthy individuals and families to manage and protect both their personal and business assets. They’re typically used for philanthropy but can be equally effective for non-charitable uses like wealth management, asset protection, and succession planning.

Functionally, a foundation operates similarly to both a corporation and a trust. It’s a distinct legal entity, separate from its founder, giving it a degree of independence. Uniquely, however, they’re often known as ‘orphan’ entities, meaning they lack shareholders or members and don’t distribute shares or other ownership titles. Instead, they’re governed by specific charters and by-laws, and managed by a council dedicated to carrying out the founder’s directives.

In the UAE, particularly within the Abu Dhabi Global Market and Dubai International Financial Centre, foundations can own property in designated zones.

This arrangement not only facilitates asset management but also protects against legal claims such as forced heirship so that the assets are preserved according to the founder’s intentions.

Matching business structures with opportunities

Ultimately, if you’re planning to invest in UAE real estate through a corporate entity, making sure that your business structure aligns with your investment goals and compliance needs is essential.

Each type of company brings its unique considerations, including tax implications, legal liabilities, and management flexibility, so understanding the UAE’s specific regulatory environment and market dynamics is vital.

By carefully choosing the right type of corporate entity and being informed about regional norms and requirements, you can maximise your real estate investment and avoid potential risks and complexities. This not only ensures compliance with local laws but also positions your investment for success.

The writer is the director of Legal and Compliance at the Knightsbridge Group.