VAT exemptions announced for residential units in UAE

VAT exemptions announced for residential units in UAE
The rent or sale of a residential part of the building shall be treated as zero-rated or exempt.
Published: 19 November 2017 - 2:55 a.m.
By: Jumana Abdel-Razzaq

Residential units in the UAE will be largely exempt from Value Added Tax (VAT), with the exception of the first supply of a new residential building within the first three years of its construction, according to a statement by the Federal Tax Authority, FTA.

The supply of commercial real estate, selling or leasing, will be subject to the Value Added Tax, VAT, at 5% from 2018.

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply, the statement said.

The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceed $102,096 (AED375,000) in value, or if it is expected that they will exceed the amount over the coming 30 days.

The FTA explained that owners of residential buildings do not register for VAT if they do not have any other business activities.

Owners who do have other business activities, however, must check to see whether or not they are required to register.

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply. The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

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