Accounting Requirements for Real Estate Companies in the UAE
A Complete Guide to Compliance with IFRS, VAT, Corporate Tax, and Audit Regulations for Real Estate Businesses in Dubai and the UAE
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One Desk Solution is a leading provider of VAT, Tax, bookkeeping, and audit services in Dubai, UAE, offering specialized expertise for real estate companies to ensure full compliance with UAE accounting regulations. Real estate companies in the UAE must adhere to defined accounting, VAT, corporate tax, and audit requirements governed by UAE laws and regulatory authorities to maintain transparent and lawful financial operations.
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Contact Us TodayOverview of Accounting Requirements for Real Estate Companies
Real estate companies operating in the UAE are required to maintain accurate and compliant financial records that provide a true and fair view of the company's financial performance. They must follow International Financial Reporting Standards (IFRS), particularly standards related to revenue recognition (IFRS 15) and leases (IFRS 16), since these directly impact real estate transactions such as property sales and rental income. Compliance with the UAE Commercial Companies Law and corporate tax legislation is also mandatory.
Key Accounting Aspects Include:
- Maintaining detailed records of all transactions including sales, rentals, development costs, and investments
- Proper revenue recognition for property sales, rental income, and related services
- Management of escrow accounts especially for off-plan property transactions as mandated by the Real Estate Regulatory Agency (RERA)
- Preparation of annual IFRS-based financial statements including income statements, statements of financial position, cash flows, and equity changes
- Use of the accrual basis of accounting to fairly record revenues and expenses over reporting periods
For more information on financial reporting frequency, read our article: How Often Should Financial Reports Be Prepared?
Accounting Standards & IFRS Compliance
Real estate companies in the UAE must comply with International Financial Reporting Standards (IFRS), which are globally recognized accounting standards. The UAE has adopted IFRS for all companies, making it mandatory for real estate businesses to prepare their financial statements in accordance with these standards.
Critical IFRS Standards for Real Estate:
Key IFRS Standards Impacting Real Estate
IFRS 15 - Revenue from Contracts with Customers: This standard is particularly crucial for real estate developers as it governs how and when revenue from property sales should be recognized. Under IFRS 15, revenue is recognized when control of the property transfers to the buyer, which may be over time for off-plan sales or at a point in time for completed properties.
IFRS 16 - Leases: This standard requires lessees to recognize most leases on their balance sheets, which significantly impacts companies with substantial property leases. Real estate companies must classify leases appropriately and account for them according to the standard's requirements.
For specialized accounting services, explore our Real Estate Accounting Services in Dubai.
VAT Requirements for Real Estate Companies in UAE
Value Added Tax (VAT) compliance is a significant component of accounting for real estate businesses in the UAE. The Federal Tax Authority (FTA) requires real estate companies to register for VAT if their taxable turnover exceeds AED 375,000 annually. VAT application depends on the type of property and transaction.
VAT Treatment by Property Type:
| Property Type | VAT Rate | Key Considerations |
|---|---|---|
| Commercial Properties | 5% VAT | Standard VAT applies on both sales and leases of commercial properties |
| Residential Properties (New) | 0% VAT | First supply of new residential properties within 3 years of completion is zero-rated |
| Residential Properties (Secondary Market) | Exempt | Generally exempt from VAT, but cannot reclaim input tax |
| Land Sales | 5% or Exempt | Depends on intended use; commercial land attracts 5% VAT |
| Real Estate Services | 5% VAT | Brokerage, property management, maintenance services include 5% VAT |
Registered companies must file timely VAT returns, keep accurate VAT records, and are subject to VAT audits by FTA to verify compliance. For detailed information on penalties, refer to our guide on VAT Penalties in UAE.
Important: Real estate companies providing both taxable and exempt supplies must implement proper VAT accounting to accurately calculate recoverable input tax. Mixed-use developments require particular attention to ensure correct VAT treatment for different units.
Audit and Regulatory Compliance Requirements
Real estate companies must comply with audit and regulatory reporting requirements, crucial for transparency and governance. The Real Estate Regulatory Agency (RERA) imposes specific audit requirements for developers in Dubai, while all companies must comply with general audit requirements under UAE Commercial Companies Law.
Key Audit Requirements:
- RERA Compliance: Real estate developers must maintain escrow accounts and appoint auditors from RERA-approved lists to conduct annual audits on both ongoing and completed projects
- Annual Financial Audit: All companies must have their financial statements audited annually by a licensed auditor
- Escrow Account Audits: Mandatory for developers selling off-plan properties to ensure proper use of buyer funds
- Regulatory Submissions: Audited reports must be submitted to Dubai Land Department (DLD), Ministry of Economy, and other regulatory bodies
- Internal Audits: Recommended to assess risk management, internal controls, and regulatory adherence
Learn more about our comprehensive Compliance Audit Services to ensure your real estate business meets all regulatory requirements.
Corporate Tax Requirements for Real Estate Companies
With the introduction of corporate tax in the UAE effective from June 2023, real estate companies must ensure compliance with the new tax regime. The standard corporate tax rate is 9% on taxable income exceeding AED 375,000, with 0% tax on taxable income up to this threshold.
Corporate Tax Considerations for Real Estate:
- Registration: All real estate companies must register for corporate tax with the Federal Tax Authority
- Taxable Income Calculation: Proper accounting records are essential for accurate calculation of taxable income
- Transfer Pricing: Related party transactions must comply with arm's length principles
- Withholding Tax: May apply to certain payments to non-residents
- Free Zone Companies: May qualify for 0% corporate tax if they meet specific conditions
Real estate businesses should maintain detailed financial records to support tax positions and optimize tax efficiency within the legal framework. For specific guidance on financial reporting, see our article on Real Estate Development Financial Reporting in UAE.
Compliance Area Comparison for Real Estate Companies
The table below summarizes the key compliance areas, requirements, governing bodies, and essential details for real estate companies operating in the UAE:
| Compliance Area | Requirement | Governing Body | Key Details |
|---|---|---|---|
| Accounting Standards | IFRS with focus on IFRS 15 & 16 | IASB, UAE Commercial Law | Maintain accurate financial statements; accrual accounting; revenue recognition critical |
| VAT Compliance | VAT registration; 5% VAT on commercial; exemptions for residential properties | Federal Tax Authority (FTA) | Timely VAT filing and documentation; VAT on services related to real estate |
| Auditing | Annual audited financial statements; escrow audits | RERA, Dubai Land Department | Appoint approved auditor; submit reports on completed and ongoing projects; ensure escrow compliance |
| Corporate Tax | Registration; accurate filing and payments | Ministry of Economy | Adherence to UAE corporate tax law; optimize tax efficiency with compliant financial records |
For businesses in related sectors, we also offer specialized services for Accounting for Trading Companies in UAE.
Frequently Asked Questions (FAQs)
Real estate companies in the UAE must comply with International Financial Reporting Standards (IFRS), with particular emphasis on IFRS 15 for revenue recognition from property sales and IFRS 16 for lease accounting. Additionally, IAS 40 applies to investment properties, and IAS 2 is relevant for properties held as inventory. All financial statements must be prepared using accrual accounting and provide a true and fair view of the company's financial position.
VAT application varies: Commercial property sales and leases attract 5% VAT. The first supply of new residential properties within 3 years of completion is zero-rated (0% VAT). Secondary market residential property transactions are generally exempt from VAT. Services related to real estate (brokerage, management, maintenance) are subject to 5% VAT. Real estate companies must register for VAT if their taxable turnover exceeds AED 375,000 annually.
Dubai real estate developers must comply with RERA regulations, which include mandatory escrow accounts for off-plan sales and annual audits by RERA-approved auditors. These audits cover both completed and ongoing projects, ensuring proper use of buyer funds and compliance with escrow regulations. Additionally, all companies must have their annual financial statements audited by a licensed auditor as per UAE Commercial Companies Law.
Key financial ratios for real estate companies include debt-to-equity ratio, current ratio, gross profit margin, net profit margin, return on assets (ROA), and occupancy rates. These metrics help assess financial health, profitability, and operational efficiency. For detailed analysis, refer to our guide on Which Financial Ratios Are Most Important.
Real estate companies with employees must comply with UAE payroll regulations, including timely salary payments, end-of-service benefits, and proper record-keeping. Payroll costs must be accurately recorded in financial statements and may be deductible for corporate tax purposes. For information on costs, see How Much Do Payroll Services Cost in UAE, and for compliance details, visit our Payroll Compliance page.
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