What is the VAT treatment for mixed-use buildings in the UAE?
Mixed-use buildings have residential parts (exempt or zero-rated for first supply within three years) and commercial parts (5% VAT). VAT is apportioned, with recovery possible for taxable portions.
Mixed-use buildings require careful VAT treatment based on different components:
Residential Components
- Apartments and residential units
- Zero-rated if first sale within 3 years
- Exempt if older than 3 years
- Follows standard residential rules
Commercial Components
- Offices, shops, and business units
- Subject to standard 5% VAT
- Applies to sales and leases
- Full VAT recovery available
Apportionment Rules
- Separate VAT treatment for each component
- Based on floor area or value
- Common areas allocated proportionally
- Detailed records required
Practical Considerations
- Separate invoicing for different components
- Different VAT rates on same building
- Complex compliance requirements
- Professional advice recommended
