Discover Everything About VAT on Property in Dubai

Whether you’re an individual looking to buy a house for the first time or a business owner searching for a bigger office, you should know that VAT on property in Dubai applies depending on the type of property. What does that mean?

You see, when you buy a property, you don’t always just pay the property’s price. Sometimes, you pay a little extra. That’s called VAT. In this post, we cover everything you need to know about VAT on property in Dubai. Let’s get right to it!

What is VAT on property in Dubai?

You’ve probably heard about Value Added Tax (VAT) in the UAE before, but do you actually know what it is? Many businesses and property owners rely on VAT consultants in Dubai to understand how this tax applies to their case. It’s an added tax that the UAE government introduced in 2018, and it affects various industries, including real estate.

The standard rate of VAT is 5%, but, as with anything else, there are a few exceptions, as it depends on the type of property. For instance, VAT on property in Dubai applies to leasing commercial real estate, like offices, shops, and warehouses, makes it subject to the 5% VAT.

However, the first sale of a newly-built home, that’s been around for three years, exempt it from VAT. Why? Simply to allow developers to recover construction input tax.

Different Types of Properties in Dubai

Now that you understand the premise of VAT on real estate in Dubai, let’s explore the different types of properties in Dubai and the VAT laws that apply to them.

Residential Properties

Whether it’s homes, flats, villas, or apartments, residential properties that are built for personal use are exempt from VAT on residential property in UAE. As previously mentioned, the first sale of any residential property is zero-rated to allow the developers to claim VAT on construction.

Here’s the thing, though: That exemption doesn’t just include the first sale. Any future sales or long-term rentals of that same property are also not subject to VAT.   

That’s why landlords don’t usually charge VAT on rent, and if their only income is from these VAT-exempt, then they don’t have to register for VAT.

Commercial Properties

From retail shops and warehouses to factories and offices, commercial properties are usually subject to the 5% VAT on commercial property in UAE. That means any business buying or selling a property for commercial purposes in Dubai pays 5% on top of the agreed price.

So, what do landlords do in this case? Well, they charge an extra 5% VAT on lease payments.

Mixed-Use Properties

Yes, as you might have guessed from the name, mixed-use properties combine both commercial and residential units. So, what’s the verdict here? How is it determined whether these units are taxed or not?

Well, in this case, developers and sellers can choose to tax the commercial units while exempting the residential ones. Of course, the process isn’t that simple, as it requires meticulous record-keeping and proper invoicing.

After all, the governing bodies expect those responsible for these properties to keep accurate records of which parts are commercial and which are residential.

At Alsun Bookkeeping and Taxation, we work with the best of the best to ensure your business is always compliant with the local laws.

VAT Registration Requirements for Property Developers and Landlords

If you don’t know, developers, landlords, and property management companies must register for VAT. Of course, that rule isn’t set in stone, as these businesses must meet certain standards before they’re forced to register.

Businesses Exceeding AED 375,000

The one factor that determines a business’s eligibility to register for VAT is its annual taxable income. If a developer’s/landlord’s/property management company’s annual taxable supplies exceed AED 375,000, they must register for VAT.

It doesn’t matter whether that company is big, medium-sized, or small. If it exceeds the threshold, it must register.

Businesses Exceeding AED187,500

This may sound weird, but if your business’s annual taxable supplies don’t exceed AED 375,000, you can still register for VAT. How?

Well, there’s such a thing as voluntary registration. If your annual taxable supplies exceed AED 187,500, you can register voluntarily to enjoy VAT’s benefits.

Impact of VAT on Real Estate Market in Dubai

So, how has VAT impacted the real estate market? Did it have a positive or a negative effect?

Residential Properties

With residential properties, we can’t say that the VAT  on property in dubai has made any significant difference. After all, it doesn’t apply to homes and apartments. So, how could it affect them?

Residential demand remains high today in Dubai. In fact, that zero-rating has helped property developers manage their costs and keep their properties’ prices competitive. Needless to say, VAT has left the residential market unharmed.

Commercial Sector

Unlike the residential sector, we can’t say that VAT left the commercial sectors without any significant impact. After all, most, if not all, of VAT’s influence falls on the commercial sector.

For tenants, they might have witnessed high rents. For businesses, though, the impact may not be the same. You see, businesses pay those extra 5%, yes, but they can also claim it back from the tax authority.

Overall, the current state of the market shows that the real estate sector hasn’t lost any momentum because of that VAT. Properties are still in demand, and people still want to rent homes, shops, and offices.

Your Property VAT Compliance With Alsun VAT Consultancy  

From identifying your unit type to claiming VAT from the tax authority, there’s a lot to handle with VAT rules and ensuring proper VAT compliance in UAE. Naturally, not everyone can handle all that and take the right step at each phase.

That’s where Alsun Bookkeeping and Taxation comes in. Our experts will take care of the entire process, so you don’t have to lift a finger.

Property VAT Consultants in Dubai

As an FTA-accredited agency with a proven track record of offering the highest-quality services, including property tax in Dubai. Combining local knowledge and technical expertise, we work closely with all our clients to ensure every transaction is handled properly. Here’s what we offer:

• VAT compliance support
• Documentation preparation
• VAT certificate issuance
• Application submission

Conclusion

Now you know everything there is to know about VAT on property in Dubai. Ultimately, understanding VAT rules might be too much of a hassle for most businesses. So, we recommend hiring professional services that lift this weight off your shoulders.

That’s where Alsun Bookkeeping and Taxation comes in. With taxing and accounting experts, you can go about your business without worrying about anything. So, contact Alsun and let’s start legitimizing your business.

FAQs