VAT on Real Estate
VAT treatment of UAE property depends on whether it is residential or commercial, and whether it is a sale or a lease. Commercial property is generally standard-rated, while residential property is often exempt or zero-rated under specific rules.
Dubai-based, FTA-aware VAT support for UAE businesses.
In the UAE, commercial real estate (sales and leases) is generally subject to 5% VAT. Residential property is treated differently: the first supply of a new residential building (within the first three years of completion) is typically zero-rated, while subsequent sales and leases of residential property are usually exempt. Bare land is generally exempt, and a property business’s ability to recover input VAT depends on the VAT status of its supplies.
The core distinction is property type. Commercial real estate — offices, shops, warehouses — is generally standard-rated at 5%, whether sold or leased, and the supplier charges VAT. Residential property follows special rules designed to keep housing affordable: the first sale or lease of a new residential building is typically zero-rated, while later supplies are usually exempt. Getting the classification right determines whether you charge VAT and whether you can recover it.
The first supply of a newly constructed residential building — made within three years of completion — is zero-rated, which lets developers recover input VAT on construction costs while not charging buyers VAT. After that window, residential sales and leases are generally exempt. Bare land (with no buildings or civil works) is typically exempt from VAT, while land with completed or partial construction may be treated differently. These rules significantly affect a developer’s cash flow and VAT recovery.
A property business’s right to recover input VAT depends on the VAT status of what it supplies. VAT on costs linked to standard-rated or zero-rated supplies (commercial property, first residential supply) is generally recoverable; VAT on costs linked to exempt supplies (later residential) generally is not. Mixed developments require apportionment. Exiloz helps property owners and developers classify supplies, apply the first-supply rule correctly, and maximise legitimate input VAT recovery.
Yes, depending on the property. Commercial property is generally subject to 5% VAT on sales and leases. Residential property is treated differently — the first supply of a new home is usually zero-rated and later supplies are usually exempt.
The first supply of a new residential building (within three years of completion) is typically zero-rated. Subsequent sales and leases of residential property are generally exempt from VAT.
Yes. Sales and leases of commercial real estate in the UAE are generally standard-rated at 5%, and the supplier charges VAT to the buyer or tenant.
Bare land — land with no completed buildings or civil engineering works — is generally exempt from VAT. Land with construction may be treated differently.
Input VAT linked to standard-rated or zero-rated supplies (commercial property, first residential supply) is generally recoverable. VAT linked to exempt supplies usually is not, and mixed developments require apportionment.
Yes. Exiloz helps property owners and developers classify supplies, apply the first-supply rule, apportion input VAT, and document recovery correctly.
Exiloz helps property owners and developers apply the right VAT treatment to residential and commercial real estate and recover input VAT correctly.
