Tourism Fees and Taxes in Dubai Holiday Home and Airbnb Business

Thinking about starting your own Airbnb business in Dubai? You're not alone. With the city attracting millions of tourists every year, holiday homes are becoming one of the most popular and profitable business ideas in the UAE. But here’s something that often gets missed in the excitement - understanding the fees and taxes involved.

If you're planning to rent out your property on Airbnb or any short-term rental platform, you need to know what charges apply, how much to collect, and how to stay compliant.

This might sound complicated - but trust us, it’s simple once you know what to look for. And in this article, we’re breaking it down for you in the easiest way possible.

Why You Should Care About These Fees

Every day, we get questions like:

“Are there extra taxes in Dubai for Airbnb?”
“How do I include tourism charges in my pricing?”

The short answer is yes - Dubai has a few official fees and taxes every holiday home operator must charge and report. These aren’t just for hotels - they apply to private holiday homes and Airbnb rentals too.

The good news? These charges are clear, fixed, and easy to manage once you know how they work. Let’s walk through each of them.

Tourism DirhamFee – AED 15 Per Night

This one’s simple. The Dubai government charges a fixed AED 15 per night for every guest stay. It’s known as the Destination Fee, and it goes directly toward promoting tourism in the city.

This fee applies whether your guest is staying in a hotel, a serviced apartment, or your Airbnb unit. It's mandatory for deluxe stay, and as a host, you’ll need to include it in the price or show it as a separate charge.

Municipality Fee – 4% of Rental Value

This one supports local services that keep Dubai clean, safe, and functioning at its best. The Municipality Fee is 4% of the rental value and applies to all short-term rentals, including Airbnb and holiday homes.

You don’t have to do anything special to calculate this. Just make sure you factor it into your final price so you're not covering it from your profits.

Service Charges – Around 10%

This is where you have some flexibility. Service charges cover the cost of what you provide to guests - like cleaning, maintenance, guest support, and even laundry services.

You can set this at a flat rate or as a percentage of the rent. Many operators go with around 10%, but it depends on how much you’re offering. If your unit includes concierge services, welcome kits, or daily housekeeping, you might go higher.

The key is to be clear with guests and make sure your price covers your actual service costs.

VAT Rules for Property Management Companies in Dubai

When it comes to property management and short-term rentals in Dubai, VAT can feel confusing at first. Many landlords and managers wonder who should charge VAT and on what amount. Let’s break it down clearly.

General VAT Rule in the UAE

VAT in the UAE is charged at 5 percent on taxable supplies of goods and services. Residential property rentals are usually exempt. However, if the property is used for short-term stays such as Airbnb, hotel apartments, or holiday homes, the rental is treated as a hospitality service, which is taxable at 5 percent.

For property management companies, the key point is this: commission and service fees are taxable. Whether you charge the property owner or the guest, VAT applies to your fee.

Example of Commission and Service Fee

Consider a booking worth AED 1,000.

If the property manager charges the owner 20 percent commission, that is AED 200. Since it is a taxable service, VAT applies. The invoice to the owner would be AED 200 plus AED 10 VAT, making the total AED 210.

If the manager also charges the guest a 20 percent service or booking fee, that is another AED 200. Again, VAT applies. The invoice to the guest would be AED 200 plus AED 10 VAT, making the total AED 210.

It is important to note that VAT is not applied to the rental amount itself. That is the responsibility of the property owner, depending on their VAT registration. VAT applies only to the management company’s service fees.

Are You Acting as an Agent or a Principal

How VAT is applied also depends on the business model.

Agency Model (Agent)

In this case, the property manager is only connecting the owner and the guest. The rental income belongs to the owner, while the manager only collects commission and service fees. VAT is charged only on the manager’s fees. The property owner separately handles VAT on their rental income if they are VAT registered.

Principal Model (Supplier of Accommodation)

Here the property manager collects the full rental amount directly from the guest and then pays the owner their share. Under this model, the manager is considered the supplier of the accommodation. VAT must be charged on the full booking amount, not just the commission. This approach is less common unless the manager has a subletting arrangement with the owner.

Practical Example

Booking amount: AED 1,000 for two nights.

Agency Model

The guest pays the owner AED 1,000 as rental income.
The guest also pays the manager AED 210 (AED 200 fee plus AED 10 VAT).
The owner pays the manager AED 210 (AED 200 commission plus AED 10 VAT).
The manager declares AED 400 as taxable revenue with AED 20 VAT in their VAT return.

Principal Model

The guest pays the manager AED 1,050 (AED 1,000 plus AED 50 VAT).
The manager keeps AED 200 and pays AED 800 to the owner.
The manager declares AED 1,000 as taxable supply and AED 50 VAT to the FTA.

Key Takeaways

Most property management companies that work with holiday homes and Airbnb follow the agency model. Under this setup, VAT is applied only to the commission and service fees, not on the total rental amount.

Property managers must issue VAT invoices to both the guest and the owner for their charges. Property owners then have to consider separately whether their rental income is subject to VAT, depending on whether they are VAT registered and how their property is classified.

Need Expert Guidance

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VAT in property management can look simple on paper but in reality it depends on how your business model is structured. For better understanding, please reach out to our business and tax consultants at COFTT. We are here to guide you, review your model, and help you stay compliant while running your operations smoothly.

How to Use This Information to Your Advantage

All of these fees and taxes can seem like a lot at first - but they’re actually what help you build a professional and trusted business.

a. When you understand these charges, you price more accurately
b. You avoid fines or issues with DTCM or tax authorities
c. You maintain a healthy profit margin because you’ve done the math
d. You give your guests transparency, which builds trust and leads to better reviews

This isn’t just about compliance - it’s about setting your business up for long-term success.

Final Thoughts – Know Your Numbers Before You List

Dubai’s short-term rental market is full of potential. Whether you're hosting on Airbnb or managing your own holiday home brand, understanding the taxes and tourism fees is step one.

You don’t need to be a tax expert - you just need to know what’s required and how to structure your pricing smartly.

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At COFTT, we help hosts and investors like you launch smoothly, stay compliant, and build profitable property businesses from day one. Got a question about Airbnb taxes or holiday home setup in Dubai? Let’s talk. We’ll walk you through it - clear, simple, and the right way.