VAT To Positively Impact the Dubai’s Real Estate Market

 

Something many UAE residents contemplating ahead of the New Year is the coming of  Value Added Tax (VAT). While nobody really knows what the future holds, one thing most residents are aware, January 1 is the date when VAT is applied in the country for the first time. 5 percent additional tax will be levied on the price of food, water, clothes, electricity, gadgets, petrol, and cars. The big question is, how will VAT affect the country?

The UAE Government is confident that the new taxation regime is going to create a positive impact in the economy particularly on businesses and to institutional investors entering the Dubai’s Real Estate Market. Our CEO, Firas Al Msaddi believes that the execution of VAT in the country will create a new level of transparency, sophistication, and professionalism in the real estate sector and will provide added incentive to the institutional investors.

 

VAT, Positive Impact on Dubai’s Real Estate

Residential and commercial properties may receive varying attention from the implementation of the VAT. The “first time” supply of residential properties within three years of completion, for both rental or purchase will be VAT exempt. It means any person either renting or purchasing residential property for the “first time”, will not impose for a VAT in any of their lease amount or the purchase price. On the other side, commercial spaces are more than likely to attract VAT. The standard rate of 5 percent, on all, rented and purchase commercial properties are applied starting January 1, 2018.

VAT will be applied to all products and services in the UAE, unless exempted or zero-rated by the Federal Law. With the government’s initiative to create a clear and open source VAT data, more and more global investors are getting interested in the city’s property sector that creates a favorable impact in the Dubai Real Estate market.

Our CEO added: “I had a chance to speak with numerous fund managers in Geneva, London and other financial centres in recent months and they have strong confidence that the presence of VAT in the country will create favorable impact in the market and they expect renewed interest in  the investment opportunities in the country.”

VAT, Will Not Hurt the Market

The implementation of VAT will require everyone to think more sophisticated, modern, and professional. It will equip the region and the UAE to be more mature, stable, and developed economy, that do not rely much on its oil and other remuneration.

In a report given by the Dubai Land Department, a total of Dhs 151 Million of investments between January 2016 to June 2017 from 217 nationalities are generated. The upcoming VAT forecasted to attract even more transactions from various sectors. If the new law will help boost real estate market, then it would be a significant step for global institutional investors to notice and allure to this new system.

We believe that VAT will not seriously affect real estate, it will not directly affect the sale or rental price of any residential properties but it will have an indirect effect on the market as a whole. It is said that the country will remain tax-free in many ways even after the implementation of VAT as there is no impose an income tax on salaries. The government will use its power to exempt many supplies in order to minimise its effect on each sector of the society, especially to the common man. The VAT is not going to hurt the market, it will not hurt the consumers much.



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