Part 3: Property Management and Tax Considerations for South African Investors in the UAE
Property Investments in UAE and SA Exchange Control - What Do You Need To Know?
Investing in the UAE comes with some practical considerations, especially around property management and taxation. This article will delve into the specifics of these considerations, along with the experiences of South African expats in Dubai. It aims to equip potential investors with the knowledge to manage their investments more effectively. As a recognised and award-winning real estate agency, Meridian Realty presents a diverse array of exceptional property investment opportunities in the UAE, leveraging a deep understanding of related regulations and becoming an invaluable ally in your journey to property investment.
Property Management in Dubai
Taking care of your property investment from abroad can be a quagmire, be it annual rentals or Airbnb-style daily or short periods. It must be noted that all short-let service providers need to be registered and all long-term rental agreements need to be registered as a so-called "Ejari". Tenants' rights are thus well protected, yet so are landlord positions secured in that tenants can be asked to provide postdated cheques (monthly or quarterly dated) to cover the rent for the next twelve months. Cheques are very much still in use and a cheque that bounces is an event you do not wish on your worst enemy. Bad debts and bounced cheques in the UAE are serious offences and every expat in the UAE is well aware of the landlord's rights should a cheque bounce.
Luckily Birchfort is a well-established property management company in Dubai that has a team of enthusiastic hospitality professionals who aspire to deliver the highest quality services in the vacation rentals, and short-term rentals industry. Relying on Birchfort to handle the day-to-day operations of properties efficiently and effectively comes highly recommended.
Property management in Dubai involves the professional administration, maintenance, and oversight of real estate properties on behalf of owners. Services provided by Birchfort include finding tenants, rental management, property maintenance, financial management, tenant relations, marketing and advertising, and legal compliance.
Armagan Demir, MD of Birchfort says "Integrity, trust, speed of service, customer obsession, and commitment to excellence are their core values. Guest experience and technology are our passions. We synergize both to provide exceptional services to both our guests and homeowners. While we thrive for excellence, we like to also enjoy life and have fun together."
Taxation
Taxation may not be a big issue in the UAE yet for SA residents, tax on worldwide income is extremely relevant. The foreign taxable rental income (applying SA tax rules) will be taxed in South Africa. The double tax agreement between the UAE and South Africa does allow the UAE to tax in the first instance, both the gains and income on immovable property. There being no income tax, no capital gains tax and no VAT on residential rental income, the reality is that SARS will have taxing right on the gross income and total capital gain.
Current SA rules on foreign assets, allow individuals to calculate their taxable rental income and capital gains tax (CGT) in AUE Dirhams using the average exchange rate. For CGT both the base cost and the proceeds are converted at the current average exchange rate.
SARS does not publish the annual average exchange rate for AED (UAE Dirhams), yet one uses the ZA Rand to US Dollar (USD) exchange rate and then multiplies the applicable USD rate by AED 3.6725. This is probably the reason why the UAE now overtook Mauritius as an investor visa destination. The UAE currency is linked to the US dollar at AED 3.6725 to the USD.
Living in Dubai
Bronwyn Pretorius, a South African expat, along with her husband and daughter has been living in Dubai for the past four years. According to her, their decision to move to Dubai has proven to be the best choice they've ever made. "One of the primary factors that make living in Dubai highly appealing to expats, especially those from Western countries, is the exceptional lifestyle it offers. Expats in Dubai benefit from several advantages such as competitive salaries, a favourable climate, outstanding leisure facilities, a relatively relaxed pace of life, and high standards of education and healthcare."
Dubai's property market presents an enticing opportunity for South African investors seeking international real estate investments. Ensuring the investor appoints an informed and experienced team to manage their fund transfers, tax compliance and their future property management, cannot be emphasised enough. Once the UAE golden visa is issued, a South African will be able to convert their SA driver's license into a UAE driver's license, despite all the Emirates driving on the right-hand side of the road.
Meridian Realty holds an impressive array of properties, with prices commencing from AED 1.6 million. Our range of residential and commercial spaces caters to varied investment inclinations. Meridian Realty's role surpasses the mere provision of properties; we simplify the buying process, offering insightful knowledge of market trends. Anchored in our comprehensive knowledge of both local and international regulations, we enable investors to undertake a secure and worry-free property investment journey. Regardless of your interest in residential villas or coveted office spaces in the city's business hub, Meridian Realty stands as your trusted guide in the complex world of UAE property investments.
It is essential to navigate the exchange control regulations when moving money in and out of South Africa. By understanding the regulations, leveraging the available allowances, and selecting the right bank with competitive rates and fees, South Africans can optimize their investment opportunities while complying with the necessary legislation. For expert advice on exchange control, structuring, cross-border taxes, and accounting consider reaching out to Mathys Briers-Louw and Hugo van Zyl at twenty2@taxforum.co.za.
-Mathys Briers-Louw is an attorney, specialising in cross-border transactions, exchange control, international money transfers and fiduciary services.
-Hugo van Zyl CA(SA) and Chartered Tax Advisor is an industry leader in cross-border transactions, taxes, and exchange control.
Ready to take the next step in your investment journey? Explore our premium range of properties listed in Dubai and let us guide you in making the best investment decision. Check out our portfolio here: https://www.meridianconnect.co.za/Page/Dubai.aspx
In case you missed it read parts one and two here:
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This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
29 Nov 2023
Author Meridian Realty