Q. I’m buying a second home in Dubai. I know taxes are low there already, but is there any way to lower them even more?
A. With so few taxes in Dubai, it’s hard to lower them.
“Bottom line—tax planning is unnecessary in Dubai,” according to Mark Nierada, a legal consultant in Dubai.
Additionally, “there are no taxes on gains or rental income and acquisition costs are fixed,” he added. Although second home owners may find taxes of their home country “may extend internationally for capital gains or rental income.”
And in Dubai, there’s no property tax, although there is a 4% tax on real estate transactions, said Andrew Thomson, partner and head of real estate and hospitality for Middle East and Africa at the law firm Gowling WLG in Dubai. That charge is based on the cost of the purchase and is due when the deal is finalized.
Although the buyer and seller are legally supposed to split the fee, each paying 2%, Mr. Thomson said the buyer is, in reality, on the hook for the fee.
“It’s just market practice,” he explained. “That being said, in a soft market, or if a seller is in a weak position, it can be negotiated.”
“A buyer can make an offer conditional on the seller paying all or some of the commission or adjust the offer to accommodate the 4%,” he said. “It’s then a matter for the seller.”
But because it is a one-time tax and a low one at that, “lowering it is difficult,” Mr. Thomson said. “Authorities are rather strict on the tax.”