VAT: What Buyers and Renters Need to Know Now.

  • 19th Dec 2017

Article Credit: https://lnkd.in/fZNaW4y

Staff Writer, Dubai Chronicle

  • Real estate brokering is defined as a service under the new UAE tax law, which will take effect 1 January 2018.
  • This means that UAE residents renting or buying property in the UAE will pay an additional 5% to the UAE government, collected by their broker, on the total commission of rent or sale.

Do you owe the UAE government money? Here, in the year 2017, the answer is likely “no”. But in 2018, VAT will be the law of the land and it is important that residents not be caught off guard with the new regulations.

Propertyfinder group is gearing up for the rollout of the first-ever tax in the UAE, wants to ensure it is a smooth transition for anyone who calls this country home.

“The biggest confusion we are seeing in the market is the mixing of real estate transaction (rent or sale) with the service of a real estate broker, whereby for a commercial building both will incur a 5% VAT and for a residential building the first one will not incur any VAT as opposed to the second one (5%). As such, VAT should not have any major slowing down effect on a buyer-friendly real estate climate should have a minimal impact on any of our residential rent”, says Simon Comina, Chief Financial Officer at Propertyfinder Group.

For owners of residential properties, either homeowners investors of residential buildings, there is no need to register for VAT as long as they do not have any other business activities. The first supply of a new residence that is upon first handover by a developer is zero-rated within the first three years after its construction. Subsequent sale or rental of such property is exempt of VAT whenever such transaction occurs.

Owners of commercial property, however, will have to register with the Federal Tax Authority (FTA) if the value of supply (the lease and/ or sale) over the preceding 12 months or the coming 30 days exceeds Dh375,000. The VAT rate for such sale and rent of commercial property is 5%. However, such owner, by registering with the FTA, will generally be able to recover VAT with respect to expenses related to the supply of the building.

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