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What UAE Property Buyers and Renters Need to Know Now
As the United Arab Emirates (UAE) is gearing up for the rollout of the first-ever tax in the country, here are the implications for the real estate sector
- Real estate brokering is defined as a service under the new UAE tax law, which will take effect 1 January 2018.
- This means that UAE residents renting or buying property in the UAE will pay an additional 5% to the UAE government, collected by their broker, on the total commission of a rent or sale.
For owners of residential properties, either homeowners or investors of residential buildings, there is no need to register for VAT as long as they do not have any other business activities. The first supply of a new residence that is upon the first handover by a developer is zero-rated within the first three years after its construction. Subsequent sale or rental of such property is exempt from VAT whenever such transaction occurs.
Owners of commercial property, however, will have to register with the Federal Tax Authority (FTA) if the value of supply (the lease and/or sale) over the preceding 12 months or the coming 30 days exceeds Dh375,000. The VAT rate for such sale and rent of a commercial property is 5%. However, such owner, by registering with the FTA, will generally also be able to recover VAT with respect to expenses related to the supply of the building.
This is an excerpt from a news article published in the Arabian Gazette and you can read it here.