Gifting property in Dubai – The difference between 4% and 0.125% transfer fee

Clients often ask about the option of gifting their Dubai property to a third party. What they usually have in mind is transferring title in the property to someone else, but on the basis of a gift transaction, rather than an arms-length commercial deal. So they want to transfer the property, but at zero consideration, because it’s a gift. This is most commonly a transfer to a family member, but occasionally it can be to someone unrelated to the donor, or from a company owned by the donor to the donor individually (or vice versa).

The first point to note is that you can technically gift a property to whomever you wish. If you agree to give it away for free, there is no law or regulation that says you have to charge for it. This principle applies whether it’s being gifted to an immediate family member, a distant relation or a complete stranger (although that would certainly be odd!).

Let’s understand what we mean by immediate family members. The DLD classes an immediate family relationship as being between spouses or between parents and their children. This can throw up some anomalies.

For example, if you want to gift your property to your brother or sister, to whom you may be very close, you would not qualify for the reduced gift rate. Consider also the position on divorce. If, as part of the divorce settlement, you gift a jointly held property to your spouse but do so prior to the divorce being finalised, you would be entitled to the reduced 0.125% gift rate. If however you complete that transfer a week after the divorce has been finalized, you would become liable for the full 4% transfer fee.

In order to prove the immediate family relationship, the Land Department will need to be provided with evidence, which must be legalized if emanating from overseas. This evidence is usually in the form of a marriage certificate and passport copies of spouses, or a birth certificate and passport copies of children and parents.

However, it’s important to understand the different treatment by the Dubai Land Department of certain types of gift in terms of transfer fee. The key point here is that gifts to spouses and immediate family members attract a reduced transfer fee of 0.125% of the deemed value of the property. Whereas gifts to any other person do not qualify for the reduced fee, and therefore attract the standard 4% transfer fee.

The other scenario we come across where gifting is involved is where an individual wishes to transfer a property from a company he wholly owns, to himself (or vice versa). Here, if he can show that the ultimate beneficial ownership will be the same before and after the transfer, then the reduced rate of transfer fee may be applied by the Land Department. As you can imagine, this usually requires a significant volume of paperwork to prove the commonality of beneficial ownership, but it can be worth the bother and the expense if there is a substantial transfer fee to be avoided.

Just to complete the picture, I should let you know the administration involved. If you want to proceed with a gift transfer you have to have a title deed and an affection plan for the property, apply for a valuation of the property by the Land Department, pay off any outstanding charges relating to the property, obtain an NOC from the developer, submit all of the documentation proving the relationship on the basis of which you are applying for the reduced transfer fee to be applied, then attend at the Registration Trustee Office, submit the documents, pay the transfer fee and wait for the new title deed.

So it’s not exactly straightforward, but if you decide that it may be financially worthwhile for you to take advantage of the reduced transfer fee rate, then do get in touch with us and we can assist in the process.