It is essential that you know the Value-added taxation on the different types of property in Dubai before you invest in any. Laws and VAT are guiding different kinds of building, and you need to get informed about all.
VAT policy on selling commercial and residential properties
The strategy for commercial and residential properties differs. Residential property is a private building for occupancy and due to that, it attracts no charges for the first three years. You will find out more in this article and with commercial buildings such as hotels, mall, restaurant, shops and many more will be subjected to the five percent VAT.
For property that is mixed such as using some part for residence and the other part for commercial use, the residence part is free while the other part that is used for commercial is under the five percent VAT.
VAT Policies
On rental property
Any property on listing for rental will be subject to the five percent VAT. That only applies to commercial buildings listed for rent. But for residential construction, VAT is exempted.
On leasing commercial and residential property
VAT doesn’t have any effect on residential building that is leased out, but the five percent policy remains with the commercial apartment. It is now left to the landlord on how he intends to pay the tax, either by increasing the lease fee or by allowing the new occupants to pay for it.
On construction companies
One of the first things you have to do to help your company gets to the limelight is by registering it on the taxation site. That will help you to become commercially competitive. That means you have to pay the VAT and if you’ve not been paying. And if the company hasn’t been paying, the firm can as well bring in VAT registered contractor or sub-contractor into their company.
On Estate Owners
If you happen to own a residential estate, you don’t have to pay for any VAT, but when it has to do with any commercial building in your estate, you have to calculate the fee over 12 years and pay for the five percent VAT.
On developers
The VAT policy on real estate properties in Dubai varies depending on the property on sale either residential, commercial or off-plan property. Residential properties are not under the law of VAT, but commercial properties in any estate in Dubai are subject to 5% VAT.
On Brokerage services
Those who buy property and sell through a broker are also under the law of VAT for their services. And that means that all the services rendered through the broker will be subject to the five percent on the whole deal.
On buying commercial and residential property
Now that there is a new rule as regarding Value added tax in UAE, you need to know if buying a residential apartment or commercial apartment is subject to the VAT policy. If you are interested in any residential property and you purchase through any means such as through estate agency or sites like LuxuryProperty.com, you don’t need to pay the VAT.
But if the apartment you are purchasing happens to be a commercial property, the building will be subject to the five percent VAT. However, you have the right to register for VAT once the revenue generated from the apartment exceeds AED 375,000 pa.
In conclusion, anyone interested in any landed premises in Dubai must be aware of the fact that there is value added tax on property and they need to know the rules guiding different apartment. You need to get familiar with this three rules which say for standard rated property there will be five percent VAT, and Zero rated properties attracts no VAT and the same will apply for every exempt property.
