Buying a Dubai flat as a German citizen

However, there are some important aspects that we would like to highlight for you in this article. We are also happy to assist you personally - our aim is to offer you the best advisory service, including legal advice, on all aspects of property in Dubai for German investors.

Property rights for Germans in Dubai

Foreigners are allowed to purchase flats in Dubai in so-called "freehold" areas. These areas are designated by the Ruler of Dubai and allow non-citizens to own unrestricted ownership of the flat. In these designated zones, foreigners can purchase flats with unrestricted ownership rights, with no time restrictions. Difference between freehold and leasehold There are two main forms of property ownership in Dubai: freehold and leasehold.

• FreeholdAs a freehold owner, you own both the property and the land on which it stands, with no time limit. This gives you full control over the use, sale or letting of the property.
• LeaseholdWith leasehold ownership, you acquire the right to use the property for a fixed period of time, which in Dubai is typically up to 99 years. However, ownership of the property remains with the original owner. At the end of the leasehold contract, the property reverts to the owner of the land.

It is important to understand these differences in order to make an informed decision when buying a property in Dubai. Freehold properties offer full ownership rights, while leasehold properties offer time-limited usage rights. At Home Dubai, we only offer freehold properties to our investors and the ownership of freehold properties is evidenced by an official document called a "Title Deed".

How much does a flat cost in Dubai?

The prices for Flats in Dubai vary depending on location, size and furnishings. Entry-level flats are available from around 150,000 euros, while luxury flats in sought-after locations can fetch significantly higher prices. In addition to the purchase price, buyers should expect additional costs, including

• Registration fee: This usually amounts to 4% of the purchase price and is paid to the Dubai Land Department (DLD).
• Broker commission: An estate agent's commission is charged for existing properties. For New construction projects this is taken over by the property developer.
• No Objection Certificate (NOC) feesThese vary between AED 500 and AED 5,000, depending on the property developer.

What financing options are there for Germans?

German citizens have several options for financing a flat in Dubai.

• Mortgage in Dubai Some banks in Dubai offer mortgages for foreign buyers, usually up to 50-60% of the property value can be financed. This means that buyers will need to contribute a higher proportion of equity. If you are a resident in Dubai, you can finance your first property with 20% of your own capital. From the second property onwards, it is always 40%.
• Financing in Germany Alternatively, financing can be arranged through a bank in Germany, with a property located in Germany often serving as collateral.

• Payment plans Independently of the bank, the property developer offers so-called payment plans for off-plan properties. These are flexible payment plans designed to make the purchase of property more attractive and accessible to buyers. These plans allow buyers to pay the total price of the property in instalments over a certain period of time instead of paying the full amount immediately.

How does the flat purchase process work?

The process of buying a flat in Dubai differs depending on whether it is an off-plan property (still under construction) or an existing property (already completed).

Purchase of an off-plan property

When purchasing an off-plan property, the process begins with the selection of the desired project and the specific unit. Once a decision has been made, a reservation agreement is signed and a deposit is paid, which is usually between 5% and 15% of the purchase price. A Sale and Purchase Agreement (SPA) is then drawn up and signed by both parties. Payments are made according to the agreed payment schedule, often in instalments linked to specific construction progress. Upon completion of the project and payment of the full purchase price, the buyer receives the final title deed from the Dubai Land Department.

Purchase of an existing property

When buying an existing property, the buyer and seller first reach an agreement on the purchase price. This is followed by the signing of a Memorandum of Understanding (MOU), which sets out the terms of the sale. The buyer usually pays a deposit, often in the form of a bank-certified cheque. The seller applies for a No Objection Certificate (NOC) from the property developer to ensure that there are no objections to the sale. Finally, both parties meet at the Dubai Land Department for the official transfer of ownership, where the remaining purchase price is paid and the property is registered in the buyer's name.

How safe is it for Germans to buy a property in Dubai?

Buying a property in Dubai is considered safe for foreign investors, particularly due to the introduction of strict regulations to protect buyers. When purchasing off-plan properties, i.e. properties in the construction or planning phase, developers must set up escrow accounts. These accounts ensure that the buyer's payments are used exclusively for the respective construction project, which minimises the risk of misdirection. Despite these safeguards, it is essential to carry out careful planning and comprehensive due diligence when purchasing both off-plan and existing properties. This includes checking that the property developer is reputable, checking the legal status of the property and understanding the terms of the contract. These precautionary measures can ensure a smooth purchase process and a safe investment in Dubai's dynamic property market.

Do I have to pay tax on rental income?

As a citizen with unlimited tax liability in Germany, you are obliged to pay tax on your worldwide income, including rental income from Dubai, in Germany. This results from the German global income principle, which states that all income, regardless of its origin, is subject to German income tax. Until 31 December 2021, there was a double taxation agreement (DTA) between Germany and the United Arab Emirates (UAE) that exempted certain income from German taxation. However, this agreement was not extended and has been in force since 1 January 2022. No income tax is levied on rental income in the UAE. Therefore, this income is fully taxed in Germany. You must declare your rental income from Dubai in your German income tax return, in particular in the AUS annex for foreign income. If taxes have been paid abroad, these could be credited against German income tax under certain conditions. However, as no corresponding taxes are levied in the UAE, this possibility does not apply. It is important to carefully document all relevant documents, such as rental agreements and proof of payment, and to state them correctly in your tax return in order to avoid any problems with the German tax authorities. If you are unsure, it is advisable to consult a tax advisor who is familiar with international tax issues.

Conclusion

Buying a flat in Dubai as a German citizen is possible and offers attractive investment opportunities. Comprehensive legal advice is essential to make the purchase process smooth and secure. Our experienced team will provide you with detailed legal advice and support you in all phases of the property purchase. Do not hesitate to contact us for a personal consultation to contact. We look forward to accompanying you on the way to your dream property in Dubai.