VAT in the UAE – A Guide for Real Estate Investors

Starting from 1st. of January 2018 and in line with other GCC countries, the UAE is to implement a Value Added Tax (VAT) amounting to 5% on most goods and services.

Being an indirect tax on certain goods and services, Law No (8) of 2017, issued by Federal Decree in September 2017, defines the goods to be imposed with VAT as follows:

„The VAT Law has identified Goods to include physical property that can be supplied including real estate, water and all forms of energy as specified in the Executive Regulations to the VAT Law.“

However, although generally included, the law subsequently details the VAT treatment specifics subject to different property usage types and other specifics.

Residential Property: Zero Rated vs. Exempt
Article 45 of the law enlists goods and services which are subject to a „zero rate“ and includes residential buildings within three years of their completion, „either trough sale or lease in whole or in part…“ This holds true also with respect to properties that have been converted from a commercial to residential use.

Also noteworthy is the fact that the law does not make a distinction as to whether the residential property is supplied to a natural person or a business entity.

Article 46 mentions transactions that entail the application of a tax exemption. Exempt are – within the property context – the supply of bare land as well as all other supplies of residential buildings through sale or lease that do not qualify for the zero rating as stipulated by article 45 („zero rating“).

The rationale of the zero rating in this instance is that property developers can reclaim output VAT on their respective third-party factor input. That said, an absence of the zero rating provision would otherwise have led to a substantial increase of development cost, ultimately being charged to the end user.

A detailed article covering also VAT treatment of commercial property and real estate held within business entities can be found under the following link:

https://www.property-blog-dubai.com/single-post/VAT-in-the-UAE-and-Dubai-A-Guide-for-Real-Estate-Investors

ABOUT
The author`s blog property-blog-dubai.com covers subjects related to Dubai`s property market and its trends and influences from an institutional investor`s perspective.

The author has been actively engaged in the Dubai property market since 2005 and advises institutional investors pertaining to their overall investment strategy, ongoing asset management as well as the initiation and execution of property transactions.

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Christian Atzert
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This release was published on openPR.