UAE’s emerging tokenized real estate scene calls for thinking around taxation

Dubai’s government has launched a pioneering new initiative that enables the tokenization of real estate. The new platform, called Prypco Mint, opens all kinds of opportunities for sellers and investors, but also calls for new ways of working including in the areas of accounting and taxation.

In May, the Dubai Land Department, a government agency for the real estate industry, launched Prypco Mint as part of a government-backed effort that could see $16 billion worth of real estate digitized by 2033. The platform allows investors to purchase fractional ownership in Dubai properties using local currency starting at 2,000 dirhams, or about $540.

Tokenization stands for using blockchains for recording and buying ownership. Tokenization can be applied to all kinds of asset classes, including financial assets such but also real world assets such as mines, sport clubs, and real estate. As projected by reports from McKinsey & Company, Roland Berger and Agile Dynamics, tokenized assets could grow to a multiple trillion-dollar market over the next few years.

According to the Dubai Land Department’s own estimates, tokenized real estate could account for 7%, roughly $16 billion, of the city’s total property transactions by 2033.

In the initial phase of Prypco Mint’s roll-out, the platform only supports dirham transactions and is available to United Arab Emirates ID cardholders, but the aim is to expand access globally in the near future and expand its scope.

The technical backbone of the project is provided by Ctrl Alt, which has selected the XRP blockchain to place property title deeds on. Ctrl Alt said that its solution is directly integrated with the government’s systems to ensure that the blockchain records stay in sync with traditional real estate ledgers.

Taxation

For sellers and investors as well as the wider tax system, the introduction of tokenized fractional ownership is a new phenomenon that will require new ways of working.

Vlad Skibunov, Partner at Dhruva Consultants, highlights the impact on taxation: “As the market embraces this innovation, understanding VAT implications is paramount. he precise VAT treatment hinges on whether these tokens are characterized as traditional real-estate interests or as virtual assets under UAE law – a distinction that will determine the applicable rates on token issuance, secondary trading and rental income distributions.”

“If characterized as virtual assets, token issuance and secondary trading may follow VAT rules for financial services – potentially qualifying for exemption or zero-rating – whereas classification as traditional property interests would subject commercial assets to 5% VAT and exempt residential units. Rental income distributions and platform fees must likewise be analysed to determine whether they fall within real estate or financial transaction scopes.”

Skibunov emphasizes that the complexity of VAT treatment for tokenized structures demands sophisticated analysis. “Buyers and developers must factor VAT liabilities into their arrangements from the outset to avoid unexpected costs and ensure compliance.”

“As UAE businesses continue to innovate and adopt emerging technologies, it is essential that market participants approach evolving investment structures with care. Clear guidance and proactive engagement will be essential to ensure compliance and unlock the full potential of tokenised real estate in the UAE,” he concluded.