Dubai properties: IRB hopes to close tax gaps in offshore holdings

DUBAI UNLOCKED | The Inland Revenue Board (IRB) hopes cooperation with other tax authorities can help cover gaps that allow tax avoidance or evasion among individuals and businesses with high-value assets overseas.

Responding to Malaysiakini’s query following the finding that Malaysians own over 500 properties in Dubai, the IRB said automatic data exchanges can help it identify those holding assets abroad, so it can assess if taxes were evaded.

“The IRB has an established platform for exchanging information with tax regulators from other countries and aims to establish closer cooperation between tax authorities to obtain information that is necessary for tax compliance.

“All information received will be utilised in tax compliance activities to curb any tax leak and evasion,” it said in a statement to Malaysiakini.

The IRB is also working to obtain data on financial accounts owned by Malaysian taxpayers abroad through country-by-country reporting.

It added that tax evasion is an “undeniable” fact among Malaysian taxpayers and is of “serious concern”.

“This involves implementing various preventive measures, including strengthening existing laws, continuous tax education, and collaboration with foreign countries through tax agreements and international tax policies,” it said.

Hundreds of Malaysian-owned Dubai properties

The board was responding to a Malaysiakini query on how it plans to address tax avoidance or evasion through offshore holdings.

Last month, Malaysiakini, as part of an investigation led by the Organized Crime and Corruption Reporting Project (OCCRP) revealed that more than 300 Malaysians are listed as owners of properties in Dubai who collectively own more than 500 properties in the city.

This includes luxury properties in the world’s tallest skyscraper Burj Khalifa or the iconic Palm Jumeirah artificial islands, alongside properties owned by the likes of Shah Rukh Khan and David and Victoria Beckham.

Checks found most of the notable individuals were prominent business owners or corporate players, while no politician, or their known proxy, was found on the list.

Of the 500 properties linked to Malaysians, more than 300 are classified as residential properties by economists at the EU Tax Observatory and Norway’s Centre for Tax Research, who worked on the leaked data separately.

From there, the economists estimated that Malaysian-owned residential properties covered in the leaked data were worth US$160.9 million (RM710 million) in 2022.

Convenient channel

Owning property in Dubai is not illegal or evidence of tax evasion.

However, the property market there is particularly attractive to real estate speculators, money launderers, and tax evaders in part due to its absence of taxes, particularly taxation on capital gains and rents.

Property in Dubai can also be purchased using cryptocurrency, while it is possible to convert cryptocurrency to fiat without incurring taxes, a Malaysian tax lawyer told Malaysiakini.

This loophole is an attractive channel to hide laundered funds with minimal accountability.

While the tax-free deal only applies to residents, resident status is easily obtained by setting up businesses there via agents.

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