I own three apartments and rent them out. Do I pay Corporate Tax?

Example 13: A natural person selling artwork A natural person, Mr. L, based in the UAE, observes that the prices of the artwork of a specific UAE artist have been increasing for more than a decade. Mr. L sets up a small office at home and starts buying the artworks from the UAE in order to sell them to clients located outside of the UAE through a network of partners located in different countries. The total Turnover from this activity amounts to AED 5 million within a Gregorian calendar year. The income derived by Mr. L due to the sale of the artwork will be subject to Corporate Tax as it is considered to be the conduct of a Business or Business Activity. 3.8.3. Real Estate Investment income Real Estate Investment income is not subject to Corporate Tax when derived by natural persons if it is related, directly or indirectly, to the selling, leasing, sub-leasing, and renting of land or real estate property in the UAE that is not through a Licence nor requiring a Licence from a Licensing Authority. Example 14: A natural person selling a residential apartment A natural person, Mr. M, based in the UAE, sells his residential apartment for AED 2,500,000. As the value of the apartment had increased since he bought it, Mr. M makes a profit of AED 500,000. The income derived by the Mr. M due to the sale of their apartment is not subject to Corporate Tax as he was not required to obtain a Licence to execute the sale. Example 15: A natural person earning rental income A natural person, Mrs. N, based in the UAE, owns several properties located in the UAE and rents them out for AED 1,200,000 per calendar year. As long as such activity is not required to be conducted through a Licence from a Licensing Authority, the income derived by Mrs. N is not subject to Corporate Tax as the activity is Real Estate Investment. Corporate Tax Guide | Taxation of natural persons under the Corporate Tax Law | CTGTNP1 22

each. The remaining 3 villas are rented as residential properties by the two brothers, jointly without the requirement for a Licence, to tenants with registered tenancy contracts issued by the Ras Al Khaimah Municipality, and independently of the sole establishment. Corporate Tax Implications Mr F: • Mr F’s income from the non-inherited Ras Al Khaimah apartments remains taxable. • Mr F's share of the income from the inherited 22 villas rented as holiday homes would not be considered as Real Estate Investment income on the basis that the lease of such villas requires a Licence. The income and associated costs would be included in the calculation of Taxable Income and subject to Corporate Tax for Mr F. • The share of rental income from the 3 villas would not be subject to Corporate Tax for Mr F. This activity qualifies as a Real Estate Investment because it is not conducted through a Licence. This income, and any related expenditure, shall not be included in the calculation of Taxable Income of Mr F. Mr G: • Mr G's share of the income and associated costs from the 22 villas rented as holiday homes would not be considered as Real Estate Investment income on the basis that renting holiday homes requires a Licence. The net income may be subject to Corporate Tax where his Turnover exceeds the AED 1 million threshold in a Gregorian calendar year (unless Mr G elects for the Small Business Relief, subject to meeting the relevant conditions).9 • The share of rental income from the 3 villas (let as residential properties) would not be subject to Corporate Tax for Mr G. This activity qualifies as Real Estate Investment because it is not conducted through a Licence. This income, and any related expenditure, shall not be included in the calculation of Taxable Income (if any) of Mr G. 4.6. Accounting Standards The Corporate Tax treatment of land and real estate property transactions and related activities will follow how these transactions and activities are accounted for under the applicable Accounting Standards where relevant. 9 Article 21 of the Corporate Tax Law. Corporate Tax Guide | Real Estate Investment | CTGREI1 20

Article 21 – Small Business Relief 1. A Taxable Person that is a Resident Person may elect to be treated as not having derived any Taxable Income for a Tax Period where: a. the Revenue of the Taxable Person for the relevant Tax Period and previous Tax Periods does not exceed a threshold to be set by the Minister; and b. the Taxable Person meets all other conditions prescribed by the Minister. 2. Where Clause 1 of this Article applies to a Taxable Person, the following provisions of this Decree-Law shall not apply: a. Exempt Income as specified in Chapter Seven of this Decree-Law. b. Reliefs as specified in Chapter Eight of this Decree-Law. c. Deductions as specified in Chapter Nine of this Decree-Law. d. Tax Loss relief as specified in Chapter Eleven of this Decree-Law. e. Article 55 of this Decree-Law. 3. The Authority may take the necessary measures to verify the compliance with the conditions of Clause 1 of this Article, and may request any relevant information or records from the Taxable Person within the timeline prescribed by the Authority. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 28 Chapter Seven – Exempt Income