April 20, 2018

VAT in UAE: Information That You Must Know

VAT is the first tax system which has been introduced in UAE. Here are some very important information for all renters and property buyers in Dubai.

The new tax regime has been rolled out from 1 January 2018. From now onwards, all individuals renting out their properties or buying properties will have to pay a 5% tax which shall be payable to their brokers. If you recall, citizens owed nothing to UAE government in 2017. For the first time in history, VAT has become the law of the land and everyone should be aware of his liabilities to the government

Many people are still confused as they are mixing up buying and renting of a property with the profession of a real estate agent.

The thing to remember is that both parties pay this VAT (5%) if the property in question is commercial. On the other hand, VAT (5%) applies only to the broker if the property is residential in nature.

This means that this new tax should not have a slowing down effect on the real estate market. It should also not put brakes on the rental market as far as homes are concerned.

According to Property Finder Group CEO Simon Comina, VAT should not bother sellers and buyers of residential properties and they should not go in for VAT registration. Of course this applies to individuals not having any other business activities.

As far as builders are concerned, there is 0% VAT on their first supply of homes if they are sold within 3 years of construction. Even the resale or renting out of such a property remains exempt from VAT. However, commercial property owners need to register with FTA if the amount of lease or sale in the last one year is greater than AED 375000. These properties will be charged with 5% VAT. After registration with FTA, the owners of these properties will also be eligible to recover their money that they have incurred on expenses related to supply.