2026-10-10 10:35

Investing in German commercial property from the UAE: no tax treaty, but the standard loan structure still works

Since 1 January 2022 Germany and the UAE have had no double tax treaty: the 2010 treaty expired on 31 December 2021, and only German law applies to UAE residents. According to the two countries' joint statement of 11 September 2026, a new treaty is still being negotiated; until then GmbH dividends paid to an individual bear the full 26.375%. The UAE is not on the German tax-haven list (StAbwV) and was removed from the EU list of high-risk third countries in 2025.

Without a treaty, Germany applies its own rules in full

A UAE resident can rely neither on a reduced withholding tax rate nor on an allocation of taxing rights: the treaty of 1 July 2010 applied only until 31 December 2021. On 14 June 2021 Germany informed the UAE through diplomatic channels that it did not intend to extend it. The exchange of tax information, including the automatic exchange of financial account information, continues under other agreements.

Germany taxes rental income from German property in any case. If a German limited-liability company (GmbH) owns the property, it pays corporate income tax (Körperschaftsteuer) of 15.825%, including the solidarity surcharge. Trade tax (Gewerbesteuer) comes on top unless the extended reduction applies (see Part 9 of the series German Prime Retail).

Exhibit 1. Without a treaty, full German rates apply: 26.375% on dividends to an individual

Issue	Position for a resident of the UAE	Basis
Double tax treaty	None since 1 January 2022; the 2010 treaty expired on 31 December 2021	Federal Ministry of Finance (BMF)
Rental income	Through a GmbH: 15.825% plus trade tax unless the extended reduction applies	§ 23 KStG; § 9 no. 1 GewStG; Part 9
GmbH dividends to an individual	26.375% withheld, with no reduction	§§ 43, 43a EStG
GmbH dividends to a UAE company	26.375%; two-fifths refunded, leaving 15.825%, if the anti-abuse test is passed	§ 44a(9), § 50d(3) EStG
Interest on an unsecured, non-profit-participating shareholder loan at an arm's-length rate	Not taxed	§ 49(1) no. 5 EStG
Interest on a loan secured on German real estate	Taxed by assessment, with no treaty cap	§ 49(1) no. 5 c aa EStG
Sale of a stake of 1% or more in a German GmbH	German-source income, taxed in Germany	§ 49(1) no. 2 e aa EStG
Inheritance tax	German tax on assets in Germany; no treaty	§ 121 BewG; BMF list
German tax-haven list (StAbwV)	The UAE is not on it	§ 2 StAbwV

No treaty makes dividends and secured loans dearer, but not ordinary loans

The difference shows at three points. Dividends to an individual are taxed at the full 26.375%, whereas Germany's treaties usually reduce this to 5–15%. Interest on a loan secured on German real estate is taxed in Germany with no cap on the rate. Gains on the sale of GmbH shares are taxed under German rules, with no treaty to allocate taxing rights differently.

The typical structure — a GmbH funded by an unsecured shareholder loan (Gesellschafterdarlehen) — does not depend on a treaty. If the four conditions in Part 9 are met, German law does not tax the interest on such a loan. The loan must be unsecured, carry no share in profits and bear an arm's-length rate, and the lender must not be resident in a jurisdiction on the StAbwV list.

What the new treaty will contain, and from when it will apply, is unknown. Until it enters into force, calculations are best made at full German rates.

Legalising documents and checking funds take time

The time needed for legalisation belongs in the deal timetable: the UAE is not party to the Hague Apostille Convention. Documents issued and certified in the UAE are legalised for use in Germany by the German Consulate General in Dubai; applications are handled by VFS Global in Abu Dhabi and Dubai. A power of attorney to buy needs at least a notarially certified signature, or the land registry (Grundbuchamt) will not accept it (§ 29(1) GBO; Part 8).

Since 5 August 2025 the UAE has been off the EU list of high-risk third countries (Commission Delegated Regulation (EU) 2025/1184). Enhanced due diligence on country grounds (§ 15(3) no. 2 GwG) is no longer mandatory for its residents. The standard checks remain: the notary, broker and bank check the buyer, the beneficial owners and, where required, the source of funds (§§ 10, 11 GwG); payment must be made by bank transfer (§ 16a GwG).

If the investor is a Russian citizen, EU sanctions apply by citizenship. EU banks may not accept deposits above €100,000 per bank from Russian citizens. The exception covers citizens of, and holders of residence permits in, EU or EEA states and Switzerland (Art. 5b of Regulation (EU) No 833/2014). The German tax-haven rules, by contrast, turn on tax residence. How the UAE taxes the income is a question for a tax adviser in the UAE: this page describes only the German side.

Implications for investors

1. Calculate the return at full German rates. Until a new treaty exists, dividends to an individual bear 26.375%, and interest on a loan secured on German real estate is taxed with no cap on the rate.

2. Test the shareholder loan against the four conditions in Part 9. A structure built on an ordinary loan does not depend on a treaty, but security over German real estate makes the interest taxable in Germany.

3. Build legalisation into the deal timetable. The UAE is not party to the Apostille Convention, so the power of attorney and corporate documents are legalised by the German Consulate General in Dubai.

What to check:
• the return calculation at full German rates — until a new treaty enters into force;
• the shareholder loan terms: unsecured, not profit-participating, at an arm's-length rate, and a lender not resident in a jurisdiction on the StAbwV list (Part 9);
• a timetable for legalising the power of attorney and corporate documents through the German Consulate General in Dubai;
• for Russian citizens — the EU sanctions restrictions, which apply by citizenship;
• a written opinion from a tax adviser in the UAE on how income from German property is taxed there.

See also: Part 8. The Notarial Closing; Part 9. The Structure Decision; What taxes does a property-owning GmbH pay?; Investing in German commercial property from Cyprus.

Sources: Federal Ministry of Finance, page on the Germany–UAE treaty of 1 July 2010 (expired on 31 December 2021) and status of double tax treaties as of 1 January 2026; Federal Government, joint statement on the state visit of the President of the UAE, press release No. 164/26 of 11 September 2026; § 2 StAbwV; § 23 KStG; § 9 no. 1 GewStG; §§ 43, 43a, 44a(9), 49(1), 50d(3) EStG; § 121 BewG; § 29(1) GBO; §§ 10, 11, 15, 16a GwG; Commission Delegated Regulation (EU) 2025/1184; Art. 5b of Council Regulation (EU) No 833/2014; German Consulate General in Dubai, legalisation of UAE documents; Hague Conference on Private International Law, status of the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents as of 30 June 2026. Legal position as of October 2026.

Photo: Mathias Konrath / Unsplash

This page is general information and not investment, legal or tax advice.

Ilya Gordon