FTA clarifies regulations regarding VAT for the real estate sector in Dubai

 

The Federal Tax Authority (FTA) has clarified regulations relating to Value Added Tax (VAT) with regards to the real estate sector, expressing that the supply of commercial real estate (selling or leasing) will be liable to the fundamental 5% tax rate, while residential units will remain generally exempt, aside from the first supply of a new residential building within the initial three years being developed which will be 0% appraised.

Residential and Commercial Buildings

The FTA characterizes the supply of real estate as activities that include, in addition to other things, the sale, rent or giving of the privilege to any real estate. 
A residential building is a building or part thereof that is planned and intended for occupation by people, and principally incorporates structures that can be involved by any individual as principle place of residence. This does exclude wherever that isn't a building settled to the ground and that can be moved without being harmed; any building that is utilized as a hotel, bed and breakfast establishment,  hospital or something like that; an adjusted apartment for which benefits in addition to the supply of accomodation are given; and any building built or converted  without legitimate specialist. 
In the interim, a commercial building is any building or part thereof that isn't a residential building. Cases incorporate workplaces, hotels, shops, and so on.
 

Supply of Residential and Commercial Buildings

The first supply of new residential building within its initial three years being developed might be zero-appraised. Every single ensuing supply might be exempt, regardless of the possibility that within the initial three years. 
All provisions of commercial properties are liable to VAT at 5%, including all buildings or parts thereof that are not residential buildings.
 

Registration for VAT Purposes

The owners of residential building don't enlist for VAT on the off chance that they don't have some other business activities. Be that as it may, owners who do have different business activities must verify regardless of whether they are required to register. 
The owner of any building that isn't residential, should enlist if the value of the supplies over the preceding year surpass AED 375,000 in value, or on the off chance that it is normal that they will exceed AED 375,000 over the coming 30 days.

VAT Recovery

A owner of a residential building won't have the capacity to recuperate VAT on expenses related to the supply of the exempt residential building. In the interim, an owner of a commercial building will for the most part have the capacity to recuperate VAT on expenses related to the supply of the building.
 

Mixed-Use Buildings

The rent or sale of a residential part of the building should be dealt with as zero-rated or excluded, depending upon whether this is a first supply or a subsequent supply. The rent or sale of a commercial part of the building, be that as it may, might be dealt with as subject to VAT at 5%. 
The tax brought about by the owner on the building should be allotted where there is an exempt supply, and the portion identified with the taxable supply (at 0% and 5%) might be recovered.
 



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