1Version 6 | May 2026

Capital Increase in Real Estate Companies Article Two of the regulation stipulates that the ownership of existing partners of new interests as a result of a capital increase is not deemed a real estate transaction, provided that their ownership percentages remain as they were before the increase; the reason for this is that the increase here does not change the ownership percentages of the partners and does not transfer ownership from one party to another, but is rather limited to increasing the capital while maintaining the same previous percentages in interests after the increase. The same article also emphasized that the entry of new partners through a capital increase is not deemed a real estate transaction, provided that the existing partners retain their interests owned before the increase and do not transfer them for a period not exceeding five years, from the date of the increase   Example 3: A. Capital Increase with Ownership Percentages Remaining Constant Two partners established a real estate company with joint capital, where each partner owns (50%) of the company’s interests. The company decided to increase its capital by issuing new interests; however, this increase did not affect the percentages owned by the two partners, and their ownership continued after the capital increase at (50%) for each partner. Accordingly, the transaction is deemed outside the scope of tax imposition. B. Entry of a New Investor with a Transaction of Partners’ interests Two partners established a real estate company with capital owned at (50%) for each partner— the existing partners. The company decided to increase its capital by issuing new interests, which were owned by a new investor, while the existing partners continued to hold their owned interests and did not transfer them for a period of (5) years from the date of the company’s capital increase. Accordingly, the transaction is deemed outside the scope of tax imposition. Cases of capital increase in a real estate company shall be subject to tax in the event of a change in the ownership percentages of the existing partners from what they were prior to the capital increase, or in the event of new partners entering through a capital increase where the existing partners fail to retain their interests owned before the increase for a period of five years starting from the date of the increase. 3.3 Subdivision or Partition of Real Estate Among Co-owners Article Two of the Implementing Regulations distinguished between the subdivision of real estate and the partition of real estate owned in common. Subdivision of real estate refers to the fragmentation of a property owned in common into specific parts defined by their boundaries and dimensions, where an independent title deed is issued for each part while common ownership continues. As for the partition of real estate owned in common, it is the procedure that results in the termination of the state of common ownership, whereby each partner has an independent share of the entire property. Accordingly, cases of subdividing real estate are not deemed taxable real estate transactions, unlike cases of partitioning real estate among co-owners, which are deemed taxable real estate transactions. However, cases of partitioning real estate may fall outside the scope of tax imposition if the following conditions are met: 3.3.1 All ownership of the real estate must be recorded in a single title deed for the same real estate. All owners must be mentioned in the same deed, and the property cannot be owned individually or separately prior to the partition. 3.3.2 Real estate ownership after partitioning must reflect the ownership rights of each owner as recorded in the title deed. After the partition, the status of the real estate ownership must align with the ownership rights held by each owner according to the original deed.