Sector Impact > Real Estate

Commercial and residential real estate are expected to be treated differently under VAT.

Commercial real estate is expected to be charged at standard rate of 5%. It is expected that businesses will be able to recover the VAT paid as input tax credit in their VAT returns.

You may view the Real Estate VAT Awareness document released by the MOF to provide details and clarifications with respect to the supply of goods and services along with examples of implementation of VAT in the Real Estate sector by clicking here.

New residential buildings will be subject to zero rated during the first three years of operation after completion which is beneficial not only to prospective buyers of new homes but also good news for the UAE real estate sector. If a property buyer takes a unit directly within three years of completion of the project, the price will be zero rated and they buyer will be exempted from VAT if he wants to sell it later.

The final impact of VAT on Real Estate as revealed by the government will be as follows:

Impact on Real Estate VAT Rate
Sale and rent of commercial buildings (not residential buildings) 5%
 First Sale or Rent of residential building after completion of construction or conversion  0%
First sale of charitable building 0%
Sale or  rent of residential building subsequent to first supply Exempt
 Land (not bare land)  5%
 Bare Land Exempt
UAE Citizens building own home 5%(recoverable)

Sector VAT News Update

Dubai’s Developers hold back passing the VAT impact to buyers for now, reports Gulf News.
Read more here

Khaleej Times

Sector impact analysis is provisional based on the GCC Draft and may change when the country issues the relevant VAT laws.