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How to Get A Holiday Home Licence in Dubai

Nov 19, 2023 | UAE Company Setup

Navigating the requirements for a holiday home rental business licence in Dubai is the key to unlocking a lucrative venture in the city’s booming tourism sector. A melting pot of cultures and a beacon for luxury, Dubai’s real estate market offers an attractive opportunity for those looking to capitalise on the increasing demand for short-term vacation rentals.

We’re here to guide you through the intricacies of securing a holiday home licence in Dubai, from understanding the eligibility criteria to completing the application process. With the proper permissions in place, you can confidently establish a holiday home company that caters to this dynamic city’s diverse and ever-growing stream of visitors.

The Holiday Home Licensing Market in Dubai

Overview of Dubai’s Tourism and Rental Market

Dubai’s reputation as a tourist hotspot is undeniable, with its towering skyscrapers, luxurious shopping experiences, and unique attractions like the Burj Khalifa and Palm Jumeirah drawing visitors worldwide. The city’s allure is reflected in its top spot in the Tripadvisor Travellers’ Choice Awards, ranking as the fourth most visited city globally. The influx of international visitors has increased, with millions arriving annually, except for a brief dip during the pandemic.

As tourism has flourished, so has the hospitality industry, offering an extensive selection of hotels and rooms to accommodate the surge of tourists. With hotels boasting an average daily rate and a high occupancy rate, there’s been a spike in demand for alternative lodging options, such as holiday homes. These alternatives have caught the eye of visitors from the GCC and Western Europe, who represent a significant portion of the tourist demographic.

Importance of Obtaining a Holiday Home Licence

Suppose you’re considering starting a holiday home business in Dubai. In that case, you’re looking at a potentially profitable venture, thanks to the thriving tourism market. You’ll need to secure the right licensing to kick things off legally. The holiday home sector often offers a higher net income compared to traditional annual rentals, making it an attractive investment. But remember, you’ll need a holiday rental business or home licence to operate and advertise your properties on various platforms.

This licence is crucial for your holiday home licence, complying with local regulations and allows homeowners or tenants to sub-let their properties for short-term stays. It also means your business will be subject to a 10% Municipality fee on bookings and additional nightly charges, which depend on the holiday home’s classification. These regulations are in place to maintain quality and safety standards for tourists opting for holiday homes instead of hotels.

Key Regulatory Bodies for Licensing

The Department of Economy and Tourism (DET) is the primary authority overseeing the holiday home licensing process. You’ll need to register your properties with the DET on the Holiday Homes system to get the green light before you start advertising them.

The registration process involves submitting various documents, like the property’s title deed, the Emirates ID of the owner, and a trade licence for professional operators. If you’re a tenant, you can register a single unit with your landlord’s nod of approval. A fixed charge is applied for registration, and annual fees are based on the property’s size and type, with no renewal fee.

The service for registration is known for its efficiency, with applications usually reviewed within one working day. Once you’ve got your licence, you’re all set to sub-let your properties and tap into the lucrative short-term rental market. Getting help from one of our business setup specialists can make this process even smoother, ensuring you cover all the bases and submit your licence application correctly to sidestep any hold-ups or rejections.

Pool Area Of A Resort-Style Holiday Home

Eligibility Criteria for Licensing

Specific eligibility criteria must be met to initiate a holiday home enterprise in Dubai. The DET ensures that all holiday homes adhere to the legal framework that upholds high quality and safety standards.

Types of Properties Qualifying for Holiday Homes

Not every dwelling can be converted into a holiday home. The DET stipulates that only registered and approved apartments and villas are suitable. Residential villas within gated communities that consist of at least hotel apartments or four villas are eligible.

Commercial villas situated on main roads are also potential candidates for holiday homes. This approach ensures a degree of exclusivity and standardisation for tourists seeking such accommodations in Dubai.

Ownership and Investment Requirements

The requirements for ownership and investment are clear-cut. Individuals or professional operators looking to register or trade licence their property must provide a copy of the title deed or sales purchase agreement, a recent DEWA bill, and a tenancy contract, if applicable.

For entities acting as the property ‘landlord’, the trade licence must specify ‘Vacation Homes Rental’ as the activity. Additionally, the licence holder’s name on the account used for registration should correspond with the name on the unit’s title deed or tenancy contract.

Homeowners can register up to eight units, while tenants are restricted to a single unit and require landlord consent.

Safety and Quality Standards to Meet

Each unit must adhere to the standards outlined in the Holiday Home Rental Regulation Guide of 2020. Properties must be well-maintained and satisfy the categorisation standards established by the regulators.

Regular inspections categorise each property; partial rentals are not allowed under the licence.

Financial obligations include the Tourism Dirham, a fee charged per room per night, with deluxe homes incurring USD 4 (AED 15) per room per night and standard homes (AED 10) USD 2.70 for the initial 30 consecutive nights of a guest’s stay. It is essential to update the online tourism Dirham system by the 15th of each month to avoid late fees.

The registration fee for a permit is USD 415 (AED 1,520), which includes fixed charges and knowledge and innovation fees.

Key information, such as trade licences, must be updated annually, although the permit itself does not require a renewal fee.

The Application Process Step by Step

Registering with the Department of Tourism and Commerce Marketing (DTCM)

Your first step in establishing your holiday home or company name is to register with the DTCM on the Holiday Homes system. This is a prerequisite for anyone looking to operate holiday homes, whether you’re an individual owner or a professional operator. Before you can list an apartment or villa for holiday rental, it needs to be registered and approved by the DTCM.

Required Documents and Details

To register holiday home units, you’ll need certain documents. You’ll need a copy of your Emirates ID if you’re an individual property owner. Professional operators must show a copy of their commercial licence, which should clearly state ‘Vacation Homes Rental’ as the business activity.

Remember, the name on the account used for registration must match the name on the unit’s title deed for operators or the tenancy contract for owners. Tenants who want to register a unit must have the landlord’s nod and can only register one unit.

Plus, all crucial information for licence and visa applications, like trade licences, must be updated annually.

Inspections and Approval Stage

Once you’ve initiated the registration process, it usually takes about one business day. You can pay for registration online, in person, or through certain banks and exchange services. It’s important to keep the online and tourism department and Dirham system up to date with the right info.

The commercial licence number must be provided when making Tourism Dirham payments if the licensee is a company or establishment. You must submit the Tourism Dirham info by the 15th of each month to avoid late fees.

The approval stage might also include inspections to ensure that the holiday home meets all the standards and regulations set by the DTCM. Compliance with these regulations is crucial for successfully operating a holiday home company in Dubai.

Pool Area Of A Villa-Type Property

Legal Obligations and Regulations

Taxation and Revenue Declarations

The UAE Ministry of Finance stipulates that foreign companies and non-resident entities must pay UAE corporate tax on income from real estate within the country. However, foreign or UAE resident individuals who earn income from real estate investments, not as a licensed business activity, are typically exempt from corporate tax. Qualifying Investment Funds, such as REITs, may also be exempt from corporate tax on income from UAE immovable property, provided they satisfy certain criteria.

The UAE has introduced a 9% corporate tax, with exemptions for SMEs and certain free zone business activities focusing on exports. Despite this, the UAE does not levy personal income, wealth, inheritance, payroll, capital gains, or real property taxes on individuals. Businesses operating within free zones that adhere to mainland UAE activities continue to benefit from corporate tax incentives.

VAT is applied at a standard rate of 5% across the UAE, and an excise tax is imposed on specific goods deemed harmful to health. Rental tax rates differ among the Emirates; for example, Dubai imposes a 5% charge on residential leases and 10% on commercial leases. Property transactions in Dubai incur a 4% transfer tax, typically the responsibility of the purchaser.

Compliance with Local Laws and Tourism Guidelines

Adhering to the UAE’s regulations, including timely payment of the Tourism Dirham and any applicable corporate taxes, is essential. Awareness of tax benefits for entities registered in free zones and the criteria for eligibility is also crucial.

The UAE’s collaboration with international organisations like the OECD underscores its commitment to global tax standards, including the implementation of a federal corporate tax. Nevertheless, the UAE maintains its distinctive tax benefits, particularly for free zone entities.

Ensuring compliance with these legal obligations and guidelines is vital for the seamless operation and legal integrity of a holiday home business in Dubai.

Benefits and ROI of Securing a Holiday Home Licence

Enhanced Credibility with Tourists

Securing a licence from the DET and DTCM ensures adherence to local laws. It elevates your property’s trustworthiness among potential guests. This endorsement signifies that your property adheres to the high standards expected in Dubai, providing peace of mind to those looking for accommodations. The rigorous inspection process, which verifies the presence of necessary safety features and amenities, reinforces the confidence in licensed holiday homes.

Access to Marketing Platforms

A licensed property can leverage a broader array of marketing channels, significantly increasing its exposure. You’re able to showcase your property on prominent rental platforms, which command a large audience of travellers looking for temporary lodging. These services provide features to enhance your listings, adjust pricing strategically, and highlight your property with promotions and unique offerings.

Utilising social media marketing strategies can attract an even broader audience, further enhancing your property’s profile.

Financial Returns and Market Trends

The ROI from holiday home rentals in Dubai is compelling, with the sector maintaining robust occupancy rates and outperforming many other markets for short-term rentals. Rental yields for holiday homes in Dubai are notably higher than those for traditional long-term leases.

The capacity to command premium rates for brief periods, especially during high-demand events, contributes to this profitability.

The real estate market has seen a surge in investors purchasing properties for use as holiday rentals, drawn by the potential for high returns. The streamlined licensing procedure and the convenience of listing properties on renowned platforms facilitate entry into this sector. Additionally, Dubai’s favourable tax environment, including no rental income tax and no capital gains tax for residents, enhances the ROI.

However, it’s important to consider the costs associated with maintaining a holiday home licence in Dubai, including annual fees and the Tourism Dirham. Despite these outlays, the persistent demand for holiday homes and Dubai’s allure and consistent visitor influx present a lucrative prospect for property owners. The burgeoning number of holiday home management companies indicates a growing market, offering support to property owners in maximising their rental operations.

Launch Your Holiday Home Business with Confidence

Launching a holiday home company in Dubai is an excellent way to capitalise on the city’s bustling tourism industry. By securing the necessary licences and adhering to the standards set by the DET and DTCM, you can guarantee legal compliance and high guest satisfaction. Remember to maintain your properties, ensure they meet the quality requirements, and stay updated with the latest regulations and tax obligations.

Armed with the right information, a robust understanding of the vacation home market and the licensing process detailed here, you’re well-equipped to transform your real estate investments into a thriving source of income. Embrace the dynamic Dubai holiday home sector and be part of a community offering world-class accommodation to discerning travellers.

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