Abu Dhabi expat rent tax increase lower for some properties

Abu Dhabi has reportedly opted to decrease the maximum tax charged on expat property rental contracts after new rates were revealed earlier this month.

A post on Abu Dhabi Distribution Company website that is still online stated that the municipality fee would be calculated at a rate of 5 per cent for all premises other than residential villas where it would be 7.5 per cent.

Read: Abu Dhabi to more than double expat rent tax for some tenants

Plans to increase the 3 per cent, which was first announced in 2016, were approved by Abu Dhabi Executive Council in May.

Read: Abu Dhabi plans increase to municipality tax

The National cited a municipality employee as confirming a 5 per cent rate would be charged for all property types, backdated to May.

Municipality payments are made each month as part of water and electricity bills but do not apply to Emiratis or company accommodation.

Based on the amended rate, an expatriate renting a villa in Khalifa City A for Dhs150,000 ($40,839) a year will now pay Dhs625 ($170) a month rather than the Dhs937.5 ($255) expected at a 7.5 per cent charge.

This compares to the Dhs375 ($102) monthly rate the tenant would have paid prior to the increase.

The higher fee comes at a bad time for landlords, with Abu Dhabi rents and property prices already under pressure over the last year and a half due to the depressed job market and new supply.

A first quarter report by real estate firm Asteco showed apartment and villa rental rates were down 3 per cent and 2 per cent from the end of 2017 and 11 per cent and 9 per cent year-on-year.

Read: Abu Dhabi property slump continues in Q1 2018

Property listings site Bayut said rents fell by nearly a quarter in some areas compared to the same period in 2017.

Read: Revealed: Where Abu Dhabi property prices, rents rose and fell in Q1

Some agencies speculated that landlords would likely be the ones footing the bill following the increase by lowering rents to attract tenants.

Abu Dhabi has announced a series of reforms over the last two weeks to boost investment and growth including a Dhs50bn ($13.61bn) economic stimulus plan and cuts to taxes on hotels.

Read: Abu Dhabi crown prince approves Dhs50bn in economic stimulus

Read: Abu Dhabi cuts tourism and municipality fees at hotels