Is VAT Applicable to Real Estate in Dubai?
VAT is levied on commercial properties in:
- In the whole United Arab Emirates
Both of following two authorities:
- Federal Tax Authority, also known as FTA
- Dubai Land Department, also known as DLD
agree to collect 5% VAT on:
- Commercial properties
- Relevant real estate services
- Real estate activities linked with:
- Commercial properties
- Located in Dubai or UAE
- Management Fees
- Real Estate consultancy charges
Regarding the Taxable Value
It is the value of service:
- Provided at a given location. Location here means property location.
- Levying conforms to normal taxation standards
The aforesaid entities stipulate the following.
All commercial property selling and buying incur 5% VAT. It is equally applicable to:
- Vacant commercial properties
- Commercial properties governed by off-plan sale notion
- All transactions falling in the remit of Building Licence
VAT During Lease Is Refundable
Two situations earn VAT Refund
- VAT paid during Lease
- VAT paid during a building purchase
VAT Paid During Lease
A sigh of relief does exist here. It is the tenant specific. A tenant can claim VAT. However, some strings are attached:
- VAT deposited while the lease was valid or in force
- Earnings of that tenant are taxable
- That person is registered
- That person qualifies tax-refund
VAT Paid During A Building Purchase
This VAT is refundable. This VAT refunding has some strings.
- It should be paid during a building purchase. It means the full building purchase.
- The fact of capital asset scheme. One example can clarify it. It is the property cost. It must exceed the Dh5 million mark.
Are Residential Properties are Liable to VAT?
No. Residential buildings in Dubai are not VAT taxable. All other sister states offer this exception. The following lists residential properties:
- Residences for armed forces
- Homes for the elderly
- Nursing homes
Many residential building transactions are VAT free. These are:
- Selling residential properties
- Renting residential properties
- Likewise real estate transactions are zero-rated
However, following situations impose VAT on residential building:
- Building not entrenched in lands
- Building proffering services beyond accommodation:
- Hotel apartments
A tax refund is available for residential buildings:
- Constructed recently by developers
- By business entities
There is one condition. Submit request after completion certification. The request is admissible for three years. The completion certification date starts the period.
Some situations treat residential properties as commercial entities. Then, these become VAT taxable. These are:
- If residential properties are leased to:
- On the short term
- If lease validity is below six months
- Occupants don’t have Emirates ID
Does VAT Apply To Commercial Buildings Made Into Residential Properties?
Not in this situation. The transformation of a commercial property in Dubai into a residential entity incurs no VAT. Rather, it qualifies a refund. Submitting of refund claim is definite. The claim period is three years. It begins with the transformation.
Mixed Use Buildings
Residential area gets zero tax rate. It can avail tax exemption either. Commercial areas attract VAT. Percentage of commercial areas decides VAT.
Is Tax Registration mandatory for:
- A landlord of a property owner
- A real estate in Dubai, UAE?
No, it is not. Landlords of the residential property needn’t register for VAT. Not only Dubai, but also UAE offers this facility. There is one string. They aren’t engaged in money-making activities. If proprietor does commercial business, VAT registration becomes important.
One condition stipulates VAT registration for landlords of commercial properties. it is if property values in excess of 375,000 AED. Provided, it happens in a year. This situation necessitates VAT registration.
Does VAT Apply To Rented Accommodations?
There are two situations. One situation involves renting residential properties. The other involves renting commercial properties. VAT doesn’t apply to the first. However, VAT applies to the second situation. It is applicable in: