Booming Housing Market
In 2024, the United Arab Emirates (UAE) experienced a significant surge in its real estate market, recording over 331,300 (!) transactions valued at approximately AED 893 billion (US$243.1 billion). This marked a substantial increase from previous years, highlighting the country’s robust property sector. In 2025, the UAE’s real estate market is expected to continue its strong upward trend, driven by solid economic growth and increasing demand.
With strong investor confidence and attractive returns, Belgian buyers have discovered the UAE real estate market, encouraged by the numerous UAE property roadshows held in Belgium. While remote property management can be challenging, Belgian investors must also navigate taxation in Belgium, where global income, including UAE real estate, needs to be declared.
Situs Taxation Principle
As a Belgian tax resident, you are required to report your worldwide income, including income from properties located abroad, such as those in the UAE, even if they are not rented out. Belgium and the UAE have signed a Double Taxation Agreement (DTA) in 1996 that defines the tax obligations for different types of income and prevent double taxation for individuals and businesses operating between both countries.
Article 6 of the UAE-Belgium DTA states that income from immovable property, including rental income and rights associated with real estate, can be taxed in the country where the property is located. In other words, the right to tax your UAE property goes exclusively to the UAE, not to Belgium.
The definition of immovable property follows the respective laws of each country and includes land, buildings, usufruct rights, and rights to natural resources, but excludes ships and aircraft. This provision applies to both personal and business income derived from such property, ensuring taxation at the source while preventing double taxation.
Cadastral Income for Foreign Properties
Although Belgium typically cannot tax your UAE property, you still need to declare it in your Belgian tax return. To align the taxation of foreign properties with domestic ones, Belgium must first assign a notional rental value, known as the Cadastral Income (CI), to properties owned abroad by Belgian residents. This CI represents the estimated annual net rental value of the property as of 1975. Since the actual 1975 value is often unavailable, the CI is currently calculated by:
- determining the property’s current market value,
- adjusting this value to its 1975 equivalent using a correction factor, and
- applying a 5.3% rate to this adjusted value to establish the (unindexed) CI.
For example, if your UAE property was purchased back in 2021 for 2.5 million AED or about €650,000, the CI would be calculated as follows:
- Divide €650,000 by the 2021 correction factor (15.018), resulting in approx. €43,281.40. This correction factor can be found on the Belgian tax authorities’ website.
- Multiply €43,218.40 by 5.3% to obtain a CI of €2,293.91
When you report this CI of €2,293.91 in your Belgian tax return (Code 1106/2106), the tax authorities will index it (multiplied by 2.2446 for income year 2025) and use that amount as the basis for your income taxation (multiplied by 1.4). This gives an amount of €7.208,47, which is normally subject to the progressive tax rates (in case it would be taxable here). As mentioned, under the DTA, the amount should remain exempt from Belgian taxation, which should be explicitly requested in your tax return.
Obligations for Belgian Residents
If you acquire property in the UAE, you must therefore do two separate things:
- Declare the Property: Inform the Belgian tax authorities about your foreign property to formally establish the CI. As of January 1, 2021, any acquisition or sale of foreign property must be reported within four months. This can be done via the MyMinfin portal or by submitting a specific form.
- Declare the Income: Report the CI of your UAE property in your annual Belgian tax return. Even if the income is exempt under a DTA, it may still influence the effective tax rate applied to your other taxable income in Belgium (a mechanism known as ‘exemption with progression’). Again, it does not matter whether the property is rented out or not. If you own it, you need to declare it.
Failure to comply with these obligations may result in penalties ranging from €1,000 to €3,000. However, in practice, Belgian authorities have rarely enforced such fines for non-compliance.
Exempted with Progression
In Belgian tax law, exemption with progression applies when certain foreign income is exempt under a DTA but still influences the tax rate on your Belgian income. While the income itself is not taxed, it is considered to determine the applicable progressive tax rate. Commonly applied to foreign salaries, pensions or business income, but also to rental income. The total worldwide income is used to set the average tax rate, which is then applied to the taxable Belgian income, potentially increasing your overall tax burden. Tax-free is never really tax-free, at least not in Belgium.
Subject-To-Tax Requirement
Belgium and the UAE thus have a DTA in place but due to the UAE’s lack of (personal) income tax, Belgium may not automatically exempt UAE-sourced income from taxation. In practice, Belgian tax authorities often require proof that the income has been effectively taxed in the UAE to grant an exemption. Given the UAE’s current tax structure, providing such proof can be challenging, potentially leading to the income ultimately being taxed in Belgium.
While this standpoint of the Belgian tax authorities is challengeable, the concept of ‘taxed,’ as referenced in the DTA, implies that income remains subject to a tax regime even if the tax laws of a contracting state explicitly exempt it, classify it as non-taxable, or if the competent authority opts not to collect a legally due tax.
According to the Belgian tax authorities, income is considered ‘taxed abroad’ if it has undergone the tax treatment normally applicable in its country of origin. This interpretation suggests that even in cases where no actual tax is levied, the income may still be deemed ‘taxed’ under Belgian law, provided it falls under the applicable tax framework of the foreign jurisdiction.
While the UAE currently does not levy any federal income tax on real estate, we believe it can be argued that the real estate in Dubai is indeed subject to a levy.
Municipality Housing Fee: Tax or Not?
In Dubai, expatriates residing in the city are subject to the Dubai Municipality Housing Fee, an annual charge set at 5% of the property’s annual rental value. This fee is collected to fund essential municipal services such as waste management, road maintenance, and public safety initiatives.
The Dubai Municipality Housing Fee functions like a tax, despite being officially labelled as a fee. It is a mandatory charge imposed on all residents (tenants and homeowners) that is imposed by the government and levied at a fixed rate based on the rent or rental value. In that sense, it closely resembles the Belgian property tax.
While it operates similarly to a tax, Dubai avoids using that term to maintain its low-tax business-friendly reputation. However, in practical terms, it aligns with taxation principles due to its compulsory nature and revenue-generating purpose.
In other emirates of the UAE, such as Abu Dhabi, Sharjah, and others, there isn’t an equivalent standardized housing fee imposed by the local municipalities. However, residents in these emirates may encounter other fees or charges related to housing and municipal services, which can vary based on local regulations and the specific terms of rental or ownership agreements.
Whether such a levy is sufficient to be considered ‘taxed’ in the eyes of the Belgian tax authorities remains to be seen in practice.