How does VAT apply to real estate in the UAE?
Commercial property sales and leases are subject to 5% VAT. Residential properties are exempt, except for the first sale or lease within three years of construction, which is zero-rated.
VAT treatment of real estate in the UAE varies depending on the type of property and transaction.
Commercial Real Estate
- Sales and leases subject to 5% VAT
- Includes offices, retail spaces, warehouses
- Input VAT can be reclaimed by registered businesses
- Applies to both new and existing properties
Residential Real Estate
- Generally exempt from VAT
- Includes apartments, villas, townhouses
- Exception: First sale within 3 years of construction
- First sale is zero-rated (0% VAT)
Zero-Rated Residential Sales
- First sale by developer within 3 years
- Allows developers to reclaim input VAT
- Reduces construction costs
- Benefits passed to end buyers
Special Considerations
- Bare land sales are exempt
- Mixed-use properties require careful analysis
- Rental income treatment varies by property type
- Off-plan sales have specific VAT rules
