Abu Dhabi’s new tax increase will see over 2.3 million expats hit with higher rent bills following the introduction of larger municipality fees.
The tax is part of a change to how annual rental is charged with the tax rate growing from the previous low of 3% cent to 5% with the exception of residential villas, which are subject to a 7.5^ charge.
While the municipality fee was announced back in February 2018, charges weren’t implemented until May this year.
ADDC, the company responsible for collecting the fees on behalf of the Department of Municipal Affairs and Transport, stated on their website “Although the total fee applies from the first day of the rental contract, the annual fees are broken down into monthly instalments to make your payments easier. You’ll receive a municipality fees bill each month, in addition to your water and electricity bills.”
This rise in tax is not targeted specifically at expatriates, but with only 550,000 UAE nationals in a city with an estimated population of around 3 million, it’s easy to see which demographic the fee has been targeted at.
The change will undoubtedly continue to add rising pressure to landlords who were already struggling under a weakened job market and encourage tenants to buy the property outright.
Emiratis, those who own their homes and people under both direct and indirect government employment, will all be exempt. By implementing these decisions and discouraging people to rent it’s hoped the advantages of purchasing real estate will become more prominent for foreigners working in the UAE.
This change comes following a large number of tax reforms occuring throughout the United Arab Emirates over recent years as it makes the transition from a oil and gas to a knowledge-based economy.