UAE Real Estate: 7 RETT-Free Property Transactions Explained Simply in 2025

REAL ESTATE4 days ago

RETT-Free Property : The UAE’s real estate market, valued at AED 958 billion in 2024 with 23.9% year-on-year growth, offers 6–10% yields in prime areas like Dubai Marina and Downtown Dubai, per gtlaw.com. While the UAE imposes a 9% corporate tax (CT) and 5% VAT, real estate transfer tax (RETT), often referred to as transfer fees, varies by emirate (e.g., 4% in Dubai, split between buyer and seller), per providentestate.com.

Certain transactions are exempt from RETT, saving investors significant costs. This article explains seven RETT-free property transactions in the UAE in 2025, with U.S. investor considerations, using web insights.

UAE RETT Framework for Real Estate

RETT, or transfer fees, applies to property ownership transfers, but exemptions exist under emirate-specific regulations, per dubailand.gov.ae:

Dubai: 4% transfer fee, typically split 2% buyer/2% seller, plus AED 2,000–4,000 registration fees, per immigrantinvest.com.
Abu Dhabi: 2% transfer fee, often buyer-paid, per middleeastbriefing.com.
Other Emirates: Fees range from 1–2%, per hausandhaus.com.
CT and VAT: CT applies to businesses (9% on profits above AED 375,000); VAT (5%) applies to commercial transactions, per taxsummaries.pwc.com.
Compliance: Transactions must be registered with emirate land departments; non-compliance risks fines up to AED 50,000, per jaxaauditors.com.

7 RETT-Free Property Transactions in 2025

1. Transfers Between Spouses

Property transfers between legally married spouses, including UAE nationals and expatriates, are exempt from RETT in Dubai and Abu Dhabi, per dubailand.gov.ae. This applies to gifts or settlements, provided the marriage is documented.

Example: Transferring a AED 5 million villa in Dubai saves AED 100,000 (4% transfer fee).
U.S. Consideration: Report gifts on Form 709 if exceeding $18,000 annual exclusion; no U.S. transfer tax, per irs.gov.
Action: Submit marriage certificate to Dubai Land Department (DLD) or Abu Dhabi Municipality; register transfer, per farahatco.com.

2. Inheritance Transfers to First-Degree Relatives

Properties transferred via inheritance to first-degree relatives (parents, children, spouses) are RETT-free in Dubai, Abu Dhabi, and Sharjah, per hawksford.com. A court-issued inheritance certificate is required.

Example: A AED 10 million apartment inherited by a child in Dubai saves AED 200,000 (4% fee).
U.S. Consideration: Include in estate on Form 706; align with U.S. estate tax rules, per irs.gov.
Action: Obtain inheritance certificate from UAE courts; register with land department, per lexology.com.

3. Transfers Within the Same Legal Entity

Intra-entity transfers, such as moving a property between branches of the same company or SPV, are exempt from RETT in Dubai, provided no ownership change occurs, per dubailand.gov.ae. This supports internal restructuring.

Example: Transferring a AED 20 million commercial plot within an SPV saves AED 400,000 (4% fee).
U.S. Consideration: Report on Form 5471 for entity changes; no U.S. tax impact, per irs.gov.
Action: Document internal transfer; submit to DLD with entity records, per emirabiz.com.

4. Gifts to UAE Government or Public Institutions

Donating properties to UAE government entities, municipalities, or public institutions (e.g., charitable foundations) is RETT-free across emirates, per czta.ae. This encourages philanthropy.

Example: Gifting a AED 3 million plot to a Dubai charity saves AED 60,000 (4% fee).
U.S. Consideration: Claim charitable deduction on Form 1040, Schedule A, if itemizing, per irs.gov.
Action: Coordinate with receiving entity; register transfer with land department, per finanshels.com.

5. Transfers Under Court Orders

Property transfers mandated by UAE court orders, such as divorce settlements or debt recovery, are exempt from RETT in Dubai and Abu Dhabi, per tamimi.com. The court order must specify the transfer.

Example: A AED 7 million villa transferred via divorce settlement in Dubai saves AED 140,000 (4% fee).
U.S. Consideration: Report on Form 1040 if part of alimony; no U.S. transfer tax, per irs.gov.
Action: Submit court order to DLD or Abu Dhabi Municipality; complete registration, per farahatco.com.

Transferring shares of an SPV that owns property, rather than the property itself, avoids RETT in Dubai and other emirates, as no direct title change occurs, per providentestate.com. This is common for institutional investors.

Example: Selling shares of an SPV holding a AED 15 million property saves AED 300,000 (4% fee).
U.S. Consideration: Report share sale on Form 8949; include in cost basis, per irs.gov.
Action: Execute share transfer via notary; update SPV records with DLD, per hawksford.com.

7. Transfers to Charitable Trusts Recognized by UAE

Properties transferred to UAE-recognized charitable trusts or endowments (e.g., Awqaf) are RETT-free, supporting community initiatives, per dubailand.gov.ae. The trust must be registered with UAE authorities.

Example: Donating a AED 4 million apartment to an Awqaf in Dubai saves AED 80,000 (4% fee).
U.S. Consideration: Claim deduction on Form 1040, Schedule A, if eligible, per irs.gov.
Action: Verify trust’s UAE registration; submit transfer documents to DLD, per emirabiz.com.

Quantitative Impact on Returns

Consider a AED 20 million commercial property yielding 8% (AED 1.6 million annually):

SPV Share Transfer: Saves AED 400,000 (4% fee), reducing acquisition costs by 2%.
Inheritance Transfer: Saves AED 400,000, preserving 100% estate value.
Non-Exempt Case: 4% RETT (AED 400,000), 5% VAT (AED 80,000 on lease), and AED 10,000 fines reduce yield to 7.5%.

Key Considerations for U.S. Investors

Risks:
- Non-Compliance: Fines up to AED 50,000 for unregistered transfers, per jaxaauditors.com.
- Oversupply: 14,000 units planned for 2026–2029 may soften yields by 0.5–1%, per omniacapitalgroup.com.
- Costs: Legal fees AED 5,000–15,000; compliance costs AED 10,000–20,000 annually, per hausandhaus.com.
Tax Compliance: IRS requires Form 1040, Form 709, Form 706, Form 5471, Form 8949, and FinCEN Form 114, per irs.gov.
Regulatory Compliance: Land departments mandate electronic filings; emirate-specific rules (e.g., Dubai’s 10% municipal fee on commercial rents) apply, per crcproperty.com.
Currency Stability: AED pegged at 1 USD = 3.67 minimizes risk, per kaizenams.com.

Conclusion

In 2025, UAE real estate investors can avoid RETT in seven transactions: spousal transfers, inheritance to first-degree relatives, intra-entity transfers, government gifts, court-ordered transfers, SPV share transfers, and charitable trust donations. These exemptions preserve 6–10% yields in a AED 958 billion market. U.S. investors, ensuring IRS and emirate compliance, can maximize savings by partnering with firms like Hawksford or Farahat & Co. for transaction structuring. RETT-Free Property