In Dubai’s ever-evolving property landscape, ensuring Value Added Tax (VAT) compliance remains one of the most critical responsibilities for real estate agents. With regulations governed by the Federal Tax Authority (FTA), agents play a pivotal role in guiding clients—whether buyers, sellers, landlords, or developers—through VAT-related obligations.
This article sheds light on key VAT rules in commercial property transactions, based on the latest FTA guidance. Whether advising a first-time investor or a seasoned developer, understanding these requirements will strengthen your credibility and protect your client’s interests.
1. VAT Registration: Who Must Register?
All owners of commercial buildings, developers, and service providers must register for VAT if their taxable supplies and imports exceed AED 375,000 in the past 12 months. The FTA typically processes VAT registrations within 20 business days, after which a Tax Registration Number (TRN) is issued.
Once registered, the business must:
- Display “Tax Invoice” and TRN on all invoices
- Submit regular VAT returns
- Pay VAT as due to the FTA
Note: Property owners with only residential assets and no other business activities are not required to register.
2. Property Classifications: Residential vs Commercial
Residential Properties (Exempt from VAT)
- Apartments and villas (not serviced)
- Student and labor accommodations
- Housing for military and police
- Nursing homes, orphanages, and rest homes
VAT is not charged on the sale or lease of these properties. Owners also cannot recover VAT on related expenses.
Commercial Properties (Subject to 5% VAT)
- Offices and retail shops
- Warehouses
- Clinics, hospitals, and medical centers
- Private schools and universities
- Serviced apartments and short-term lets (under 6 months)
Commercial property transactions—including both rentals and sales—are typically taxable at 5%.
3. VAT on Property Sales: Key Scenarios to Understand
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Transaction Type
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VAT Treatment
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Vacant Commercial Property
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5% VAT applies. Buyer pays VAT and can recover it if registered.
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Rented Property (less than AED 375,000) sold to a non-taxable person
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5% VAT applies. Buyer pays VAT.
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Partly rented or rented property sold as a “going concern” to a taxable person
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VAT is not charged. No VAT payable by buyer.
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The classification of the sale—as a vacant asset, a going concern, or otherwise—is key to determining VAT applicability.
4. VAT on Property Rentals
Commercial property landlords must:
- Register for VAT
- Charge 5% VAT on rent
- Issue valid Tax Invoices
- File VAT returns and pay tax on time
This applies to short-term lets, serviced units, and any space used for business or commercial purposes. Residential leases, however, remain VAT-exempt.
5. Developers & New Builds
Developers selling newly built properties (within 3 years of completion) can apply 0% VAT—provided they are registered. This allows:
- VAT recovery on all development expenses
- Zero-rated supply benefits for buyers
6. VAT on Property-Related Services
Agents must be aware that the following services are also VAT-liable:
- Property maintenance
- Owners’ association fees
- Electricity, water, cooling, gas
- Real estate agency commissions
When billing clients, agents and service providers should charge 5% VAT and ensure proper documentation is maintained.
7. Reverse Charge Clarification
The reverse charge mechanism applies only to imports of services or goods from outside the UAE. For real estate in the UAE, the place of supply is always within the UAE, and standard VAT rules apply—not reverse charge.
8. VAT Refund for UAE Nationals Building Homes
A lesser-known benefit: UAE citizens building their own residence may claim a VAT refund on construction-related expenses within 6 months of:
- Moving in, or
- Receiving a completion certificate
This only applies to personal residential builds—not commercial or investment properties.
Why This Matters to Agents
As an agent, being well-versed in VAT matters positions you as a trusted advisor. Clients expect transparency and accuracy—especially with financial obligations as critical as taxes.
By understanding the nuances of VAT:
- You avoid transactional delays or penalties
- You ensure contracts and invoices are prepared properly
- You enhance client confidence through clear, informed guidance
Let fäm Conveyancing Support Your VAT Transactions
At fäm Conveyancing, we help agents and their clients navigate the full VAT compliance process—whether for complex commercial transfers, developer sales, or individual rentals. From verifying VAT registration to ensuring tax invoice accuracy, our team ensures transactions are seamless, timely, and legally sound.
📞 +971 58 822 9107 | +971 52 128 9592
📧 [email protected]
🌐 www.famconveyancing.com