Real Estate

in Dubai

Urs Stirnimann

Swiss ILC Services DMCC, Dubai

2 October 2015

• 7 Emirates form the United Arab Emirates (UAE)

• - 9 mio. Inhabitants - Population growth: 8% p.a. for 15 years - Oil related income for Dubai: approximately 5% of GDP - ~85% of population are foreigners

• Hub for: - Middle East - Asian Subcontinent - Central Asia - Parts of Africa

• 2 billion people live within a flight radius of 4-5 hours

General Info about the UAE

• Up to 2002, foreigners could not own property in

the UAE.

- Few foreigners were interested in buying UAE

property.

Similar to companies:

• UAE companies could not be controlled by

foreigners.

- They could only own up to 49%.

- Since 1986 foreigners can own 100% in free

zones companies.

Real Estate Ownership in the UAE

• After the 9 /11 attack, Arabs not welcome

anymore in the west.

• Arabs withdrew money from the west to place

them in banks in Arab countries.

• Which placed it again in the west.

• Investment possibilities were needed in the Gulf

region.

9/ 11

• In 2002 announcement of

Palm Island,

• where foreigners can

own property.

• Followed by many other projects

Burj Khalifa, Emirates Hills, Meadows, Springs,

Dubai Marina, etc.

Palm Island in Dubai

• Business model to attract more than 90%

foreigners.

Dubai a place for Foreigners

• Other Gulf countries followed and allowed

foreigners to own in certain areas,

westernised projects representing western

lifestyle.

• Attractions which make Dubai appealing for

vacation and to live.

• The success of the projects attracted additional

money from all over the world.

• No income nor wealth tax in the UAE

(only for foreign oil companies and banks).

Foreigners can buy certain projects

• Dubai was heavily

affected by the Financial

Crisis 2008/2009.

• Real Estate lost 50-60%.

• In the meantime it is

again on the level of

2008.

Financial Crisis

• Dubai has become the safe haven in

the region (for the rich people).

• Iraq war, Arab Springs, Syria, ISIS

(Daesh)

increased the demand for Dubai.

• Everybody is welcome and easy to

get a residency through:

- Employment

- As shareholder of a UAE company

- As owner of UAE property

• Residency for 3 years, renewable

UAE: Safe Haven

• Majority of property is bought by natural persons.

• Some bought it in the name of offshore companies.

• Up to 2010, it was possible to buy with BVI, Seychelles

companies,

or UAE offshore companies from RAK or Jebel Ali.

• Some of those companies were held by trusts or

foundations.

• In 2010, it was announced that Dubai property can only

be bought in the name of JAFZA offshore companies or

personal name.

Property Purchase

• Transfer charge at Dubai Land Department: 4%

• Restrictions for selling of the property.

• Change of shareholder must be reported to

Dubai Land Department

• Any change of shareholder results in a Land

Department charge of 4%.

• 0.125%: if transfer from company to

shareholder of the company (same person).

Property Registration Charges

• JAFZA has become reluctant to register trusts /

trustees holding the JAFZA company.

• UAE has also trust law in the financial free zone

(DIFC).

But very seldom used.

• Trust in any case can only own assets in UAE

areas where foreigners can buy.

Trust – UAE Property

• Other areas might be handled by a Waqf which

has a certain similarity with a trust.

• Based on Shariah law.

Waqf

• Trustee holds a JAFZA company in his own

name on behalf of the trust or foundation.

Trustee holds the Property

• Inheritance in the UAE is rather complex.

• Probate through UAE courts, all in Arabic.

• Court of First Instance will apply Shariah Law

usually also for non-Muslims.

• Appealing it might lead to the application of the

foreign law for non-Muslims.

• Might take many months if not years.

Inheritance in the UAE

• Since May 2015, non-Muslims can register a

will at the DIFC Will Registry.

• Based on Common Law principles.

• All in English.

• Testamentary freedom.

• However, only for Dubai assets.

• Only for non-Muslims and who has never been

Muslims before.

DIFC Will

DIFC Will

DIFC Will

Bank Account

in Dubai

Dubai Offshore

Company House / Apartment

in Dubai

Guardianship

of Children

Bank Account

in London

Villa in

Ras Al Kaimah Company in

Mauritius

Company in

Abu Dhabi

Property in

India

• The experience of the financial crisis

recommends to buy only finished projects and

not off-plan.

• And only from well recognized developers with

a proven track record.

• Location is also in Dubai important.

• Expo 2020 might bring some additional input.

Buying Property

• The UAE and many countries of the Middle East

are not part of the 1961 Hague Convention.

• Expensive legalisation in UAE consulates.

~USD 1,000 per document

Legalisation, Apostille

• Algeria

• Armenia

• Austria

• Belarus

• Belgium

• Bulgaria

• Bosnia

• Canada

• China

• Czech Republic

• Egypt

• Finland

• France

• Germany

• India

• Indonesia

• Italy

• Korea

• Lebanon

• Luxembourg

• Malaysa

• Malta

• Morocco

• Mozambique

• New Zealand

• Morocco

• Mozambique

• New Zealand

• Pakistan

• Philippines

• Poland

• Romania

• Seychelles

• Singapore

• Spain

• Sri Lanka

• Sudan

• Syria

• Switzerland

• Tajikistan

• Thailand

• Tunisia

• Turkey

• Turkmenistan

• Ukraine

• Usbekistan

• Yemen

Double Tax Treaties with the UAE

Normal Swiss Withholding Tax on Dividends: 35%

Double Tax Treaty Switzerland - UAE

Swiss Company A

UAE Company

Swiss Company B

>10% Ownership Withholding Tax 5%

<10% ownership Withholding Tax 15%

Shareholder

• Swiss Business Council is a source of experience.

• 250 Members

• Offices in Swiss Tower, JLT, Dubai

Swiss Business Council

Questions?