No annual property tax against Proposition 13. A flat 4% transfer fee against a Measure ULA cliff that can cost a quarter of a million dollars on a single dollar of price. And the California tax bill on Dubai rental income that almost no Dubai marketing page will show you.
By Umer Shauket, Founder & CEO, Cresco Real Estate. Dubai head office, US office in Los Angeles. Licensed UAE brokerage, RERA ORN 34288.
Our US office is in Hollywood. We sell in Dubai. So this is the comparison we get asked to make more than any other, and it is the one most often made dishonestly.
You will find pages telling you Dubai has no property tax and Los Angeles has Measure ULA, therefore Dubai wins. That is not analysis. That is a brochure.
Here is the honest version. On carrying cost and transaction friction, Dubai is dramatically cheaper. On legal depth, lender competition and the ability to hold an asset for thirty years without thinking about it, Los Angeles is stronger. And if you are a California resident, the single largest number in this comparison is one that most Dubai marketing never mentions at all.
Start with the money that leaves your account on day one.
| Cost at purchase | Dubai | Los Angeles |
|---|---|---|
| Government transfer tax or fee | 4% DLD transfer fee | 0.56% base, city plus county |
| Registration and trustee | AED 4,000 plus VAT above AED 500,000, plus AED 250 title deed | Recording fees, a few hundred dollars |
| Agency commission | 2% plus 5% VAT, buyer paid | Typically seller paid |
| Title insurance | Does not exist. DLD is the register | Owner policy, roughly 0.3% to 0.5% |
| Escrow and closing | Developer escrow under Law No. 8 of 2007 for off plan | Escrow company fees, split by custom |
On the surface Dubai looks more expensive to enter. It is. The 4% Dubai Land Department transfer fee is roughly seven times the Los Angeles base transfer tax of 0.45% city plus 0.11% county.
Then you get above five million dollars in Los Angeles and the picture inverts violently.
Measure ULA adds a transfer tax on top of the base rate for high value property sales in the City of Los Angeles. For the fiscal year running 1 July 2026 to 30 June 2027 the thresholds are $5,400,000 and $10,900,000, and the rates are 4% and 5.5%.
Read the next sentence twice, because it is the part people get wrong.
The rate applies to the entire consideration, not to the amount above the threshold.
This is not a marginal bracket. It is a cliff. A sale at $5,400,000 pays no ULA tax at all. A sale at $5,400,001 pays 4% of the whole $5,400,001, which is $216,000. Add the base transfer tax and the difference between those two sale prices is roughly $240,300.
| LA City sale price | ULA rate | ULA tax | Applied to |
|---|---|---|---|
| $5,400,000 | 0% | $0 | Below threshold |
| $5,400,001 | 4% | $216,000 | Entire consideration |
| $10,900,000 | 4% | $436,000 | Entire consideration |
| $10,900,001 | 5.5% | $599,500 | Entire consideration |
The thresholds are indexed and change each fiscal year, so confirm the current figures with the City of Los Angeles Office of Finance before you price a deal. But the structure does not change. Above the line, a seller in the City of Los Angeles hands over four to five and a half percent of gross before anything else.
Dubai has no equivalent. The 4% DLD transfer fee is the same on a one million dirham studio and a two hundred million dirham villa on Palm Jumeirah. There is no cliff, no threshold and no indexation.
This is the single clearest structural advantage Dubai has over Los Angeles, and it only shows up at the top of the market.
This is where the two markets stop being comparable.
Dubai has no annual property tax. Not a low one. None. There is no municipal ad valorem levy on ownership of a freehold unit. What you do pay is a service charge to the owners association, set per square foot per year, approved by RERA and collected through the Mollak system. On a well run building that is a real cost and you should model it, but it is a building maintenance cost, not a tax, and it does not go to a government.
Los Angeles taxes ownership under Proposition 13. The base rate is 1% of assessed value. Voter approved bonds and direct assessments sit on top, and a typical total ad valorem burden in Los Angeles County runs roughly 1.18% to 1.30% of assessed value. Treat that band as indicative rather than statutory. Your actual bill depends on your tax rate area, and you should pull the parcel from the Los Angeles County Assessor before you underwrite anything.
Proposition 13 then does two things that pull in opposite directions.
It caps the annual increase in assessed value at 2%. If you hold for twenty years, your assessed value drifts far below market and your effective tax rate on real value falls every year. This is genuinely powerful and Dubai has no equivalent, because Dubai has nothing to cap.
It reassesses to full market value on change of ownership. Which means the low tax bill you see on a property you are about to buy is the seller's bill, not yours. Underwrite the tax on your purchase price. Every year we watch buyers model the current bill and get a shock in month fourteen.
| Annual cost on a $2,000,000 equivalent | Dubai | Los Angeles |
|---|---|---|
| Property tax | $0 | Roughly $23,600 to $26,000 |
| Service charge or HOA | Varies by building, RERA approved | Varies by building |
| Insurance | Building policy, modest | Fire exposure dependent, rising |
| Tax on the rent, UAE side | $0 | Not applicable |
Over a ten year hold, that property tax line alone is somewhere around a quarter of a million dollars of difference on a two million dollar asset. It compounds against you every year you own in Los Angeles and it is the reason gross yield and net yield diverge so far between these two cities.
Both cities regulate what you can charge a sitting tenant. They regulate it very differently.
The Los Angeles Rent Stabilization Ordinance covers rental units in buildings first built on or before 1 October 1978. That is a very large share of the multifamily stock in the city. For the year running 1 July 2026 to 30 June 2027 the allowable increase is 3%.
The formula was changed in February 2026. The allowable increase is now calculated as 90% of CPI, held inside a band of 1% to 4%, and the additional increases landlords could previously take for providing gas and electricity have been eliminated. If you underwrote an LA rent stabilized building on the old formula plus utility adders, your model is now wrong.
Dubai regulates rent increases through the RERA rental index under Decree No. 43 of 2013. The mechanism is not a fixed percentage. It is a gap test against the market rate for comparable units.
| How far current rent sits below the RERA market rate | Maximum increase allowed |
|---|---|
| Up to 10% below | 0% |
| 11% to 20% below | 5% |
| 21% to 30% below | 10% |
| 31% to 40% below | 15% |
| More than 40% below | 20% |
The practical difference is direction. In Los Angeles the cap is absolute and applies regardless of where your rent sits relative to the market, so a below market unit stays below market forever. In Dubai the cap is relative, so a landlord who has fallen behind the market is allowed to catch up in steps, and a landlord already at market gets nothing.
Neither system is landlord friendly in the way marketing implies. Dubai simply has a route back to market that Los Angeles does not.
On possession, Dubai requires twelve months notarised notice to evict for sale or personal use under Law No. 26 of 2007 as amended by Law No. 33 of 2008. That is a real constraint. Do not buy a Dubai property tenanted and expect vacant possession quickly.
Here is what almost no Dubai marketing page will tell an American in Los Angeles.
If you are a California resident, California taxes your Dubai rental income.
California taxes residents on worldwide income. Your top marginal state rate is 13.3%. And California does not have a preferential rate for long term capital gains. The Franchise Tax Board states it plainly. California does not have a lower rate for capital gains. Your gain on selling the Dubai apartment is taxed as ordinary income at your California rate.
There is no relief coming from the UAE side, because the UAE charges you nothing, so there is no foreign tax paid and therefore no foreign tax credit to claim. The absence of UAE tax is exactly what removes the offset.
Layer that on top of the federal picture and the position for a Los Angeles resident buying in Dubai looks like this.
| Tax event on a Dubai property | UAE | United States federal | California |
|---|---|---|---|
| Annual property tax | None | None | None |
| Rental income | None | Schedule E, ordinary rates | Up to 13.3% |
| Capital gain on sale | None | Long term rates plus 3.8% NIIT | Taxed as ordinary income |
| Foreign tax credit available | No, because no UAE tax was paid | ||
| 1031 exchange into the property | No. IRC section 1031(h) blocks US to foreign swaps | ||
So Dubai is tax free in Dubai. It is not tax free to you.
The honest comparison for a California resident is not zero versus 1.25%. It is zero annual property tax and no UAE income tax, against a US federal bill plus a California bill on the rent and on the gain, versus a Los Angeles property carrying an annual property tax but generating income that is already inside the California system with all the deductions and depreciation that come with domestic property.
Dubai still usually wins that comparison on net cash flow. It wins by a smaller margin than the brochures claim, and it wins for a different reason than the one people expect. The win comes from the absence of the annual tax, not from the income being untaxed, because the income is taxed. Just not by the UAE.
We are not tax advisers and this is not tax advice. Take this table to your CPA before you buy anything. If you do not have one who has handled foreign rental property, we will tell you that too rather than let you find out on Form 8938.
American investors underwrite US rental property on 27.5 year depreciation. Foreign residential rental property does not get that. It sits on the Alternative Depreciation System at 30 years, straight line.
That is a smaller annual deduction on the same building. It is not a disaster and it does not change the direction of the answer, but if you have modelled a Dubai apartment using the same depreciation schedule as your Los Angeles duplex, your after tax return is overstated. Rerun it at 30 years.
We would rather tell you this than have you find it out.
Lender competition. A US buyer in Los Angeles can shop dozens of lenders on a thirty year fixed rate mortgage. Dubai caps mortgage tenor at 25 years under UAE Central Bank Circular No. 31 of 2013, requires a debt burden ratio inside 50%, and caps total financing at seven times annual income for expatriates. Non residents in practice face tighter commercial terms than the regulation requires, because the regulation does not address non residents at all.
Title insurance and case law depth. Los Angeles sits on a century of litigated real property law and an insurable title system. Dubai has a strong register at the DLD and no title insurance market, because the register itself is the guarantee. That works well until you have a dispute, and then you are in a younger legal system.
Prop 13 on a long hold. If you buy in Los Angeles and hold for twenty five years, the 2% assessed value cap turns into a very large subsidy. Dubai has no mechanism that rewards duration the same way.
You already understand it. Do not undervalue this. You know how a California escrow works, you know who to call, and you know what a bad neighbourhood looks like from the street. In Dubai you know none of that, and the cost of not knowing is real.
No annual property tax. The largest single line item in a Los Angeles hold simply does not exist.
No transfer tax cliff. Above $5.4 million in the City of Los Angeles, Measure ULA takes four to five and a half percent of gross on exit. Dubai takes 4% on entry and nothing on exit.
No UAE capital gains tax and no UAE income tax on the rent for an individual holding in a personal capacity. Cabinet Decision No. 49 of 2023 confirms that individuals earning real estate income in a personal capacity fall outside UAE corporate tax.
Payment plans on off plan. A developer will stage payments across construction. No US bank does this. Read our warning on this carefully though. A 20/80 plan is a payment plan. It is not a valuation.
Gross yields. Dubai gross yields on well selected stock have run materially above prime Los Angeles for several years. Gross is not net, and the difference is service charge, void and management, which is why we insist on modelling net.
If you are buying to occupy, buy where your life is. This entire comparison is close to irrelevant for a primary residence.
If you are buying to invest, the split is roughly this.
Los Angeles suits you if you want a very long hold, you value legal certainty over yield, you want thirty year fixed rate financing, and you are comfortable that Proposition 13 will do more for you in year twenty than yield will do in year two.
Dubai suits you if you are buying for income, you want the annual carrying cost close to zero, you are transacting above the Measure ULA threshold and want to escape it on the exit, or you want residency attached to the asset. Just go in knowing your CPA still has a claim on the income, and if you are a California resident, so does Sacramento.
What we will not do is tell you Dubai wins because it is tax free. It is tax free in Dubai. You are still American, and America follows you.
Same method, same sourcing, different American city.
Is Dubai property really tax free for a Californian?
It is tax free in Dubai. There is no annual property tax, no UAE income tax on the rent and no UAE capital gains tax for an individual holding in a personal capacity. It is not tax free to you. The United States taxes citizens on worldwide income, so the rent goes on Schedule E, and California taxes residents on worldwide income at a top marginal rate of 13.3%. California also has no preferential rate for long term capital gains, so a gain on sale is taxed as ordinary income at the state level.
Can I claim a foreign tax credit on my Dubai rental income?
No. A foreign tax credit offsets tax you actually paid to a foreign government. The UAE charges an individual no income tax on residential rent, so no foreign tax has been paid and there is nothing to credit. There is also no United States to UAE income tax treaty. The absence of UAE tax is exactly what removes the offset.
How much is Measure ULA and when does it apply?
For the fiscal year running 1 July 2026 to 30 June 2027 the thresholds in the City of Los Angeles are 5,400,000 dollars and 10,900,000 dollars, and the rates are 4% and 5.5%. The rate applies to the entire consideration rather than to the amount above the threshold, so it is a cliff and not a marginal bracket. A sale at 5,400,001 dollars pays roughly 240,300 dollars more in total transfer tax than a sale at 5,400,000 dollars. Thresholds are indexed annually, so confirm current figures with the City of Los Angeles Office of Finance.
What is the annual property tax on Dubai property?
There is none. Dubai does not levy an annual ad valorem property tax on freehold ownership. Owners pay a service charge to the owners association, calculated per square foot per year, approved by RERA and collected through the Mollak system. That is a building maintenance cost rather than a tax and it is not paid to a government.
Can I 1031 exchange a Los Angeles property into Dubai?
No. Section 1031(h) of the Internal Revenue Code provides that real property located in the United States and real property located outside the United States are not like kind. A 1031 exchange from a US property into a Dubai property is not available, and the gain crystallises on sale.
How much can I raise the rent in Dubai compared with Los Angeles?
Los Angeles caps the increase absolutely. The Rent Stabilization Ordinance covers rental units in buildings first built on or before 1 October 1978 and the allowable increase for 1 July 2026 to 30 June 2027 is 3%, calculated as 90% of CPI inside a band of 1% to 4% after the February 2026 formula change, with the former gas and electricity adders eliminated. Dubai caps the increase relative to market under Decree No. 43 of 2013. If the current rent is within 10% of the RERA market rate the increase allowed is zero, rising in steps to 20% where the rent is more than 40% below market.
What depreciation schedule applies to a Dubai rental property on my US return?
Foreign residential rental property is depreciated over 30 years, straight line, under the Alternative Depreciation System, rather than the 27.5 years that applies to United States residential rental property. The annual deduction is smaller on the same building, so a model built on 27.5 years overstates the after tax return.
Cresco Real Estate LLC is a licensed UAE brokerage, RERA ORN 34288, with a US office in Los Angeles. We are not tax advisers, attorneys or licensed financial advisers in any US state. Everything above is general information about published laws and regulations, current as at 24 August 2026, and rates and thresholds change. Verify every figure against the issuing authority and take advice from your own CPA and attorney before you transact.
Dubai head office. US office in Los Angeles. A licensed UAE brokerage, RERA ORN 34288, that will put the risks, the tax and the comparable transactions in front of you before you sign. Bring your CPA. We will work with them.