Know About VAT on Real Estate Services in The UAE

It is essential for both real estate agents and property buyers/renters to comprehend VAT on real estate services in the United Arab Emirates. The UAE’s real estate companies may receive different VAT treatment based on the kind of property and the nature of the transaction. Regardless of the kind of property (residential or commercial), real estate brokers in the United Arab Emirates are obligated to charge VAT for their services.

1. Real Estate Services Where VAT is Applied

• Leasing and renting properties
• Sales agreements and negotiations
• Property management

The standard VAT rate in the UAE is 5%. So, real estate agents will typically add 5% VAT to their service fees.

2. Types of Real Estate Properties & Transactions Involved

1. Standard Rated Supplies (Taxable at 5%)
   1. Lease or sale of commercial property: This includes offices, warehouses, retail spaces, and any property not considered residential or bare land.
2. Zero Rated Supplies (Taxable at 0%)
   1. First supply of new residential buildings within 3 years of completion: This applies to the initial sale or lease of a newly built residential property.
3. Exempt Supplies
   1. Supply of residential buildings after three years: Once the initial 3-year window passes, subsequent sales or leases of residential buildings are exempt from VAT.
   2. Bare land: This refers to undeveloped plots with no buildings or structures.

3. Expert Tips for Minimizing VAT Costs on Real Estate Transactions in UAE

Here are some strategic steps can help you optimize your VAT impact:

a. Planning for the Transaction Type:

• New Residential Properties: If you’re buying a new residential property within 3 years of completion, you’ll benefit from the 0% VAT rate. Consider timing your purchase within this window if possible.
• Commercial vs. Residential: If you have some flexibility, consider purchasing a commercial property instead of a residential one after the 3-year exemption period. Commercial properties are subject to the standard 5% VAT, but you can recover the VAT incurred on development costs.

b. Optimizing Service Selection:

• Negotiate Service Fees: Real estate agent commission is negotiable. By securing a better base fee, the overall VAT impact will be slightly lower.
• Consider Alternative Service Providers: Explore options like online listing platforms or smaller agencies with potentially lower service fees, impacting the final VAT amount.

c. Exploring VAT Recovery Options:

• For Developers: If you’re a developer of commercial properties, ensure you maintain proper records of VAT incurred on development costs. This allows you to claim input VAT deductions, effectively recovering that VAT amount.

d. Important Considerations:

• Always Seek Professional Advice: VAT regulations can be intricate. Consulting with a UAE-based tax professional can help you navigate specific situations and ensure compliance.
• Focus on Long-Term Value: While minimizing VAT is desirable, prioritize finding the right property or service that aligns with your overall goals. Don’t compromise on quality solely to save a small amount on VAT.

4. Role of SPK Auditors

In accordance with our clients’ needs, we offer end-to-end VAT services, such as VAT registration, advisory, accounting, assessment, filing, payment, refund support, etc. Our clients should have total peace of mind from our VAT services.

There are several reasons why a company or organization should use SPK Auditors for their VAT needs. Among the possible advantages are the following:

• Knowledge: Our team of experts has extensive knowledge of VAT laws and regulations. They have also prepared and submitted VAT payments, refunds, and returns before.
• Time-saving: By assisting companies and organizations in making major time and effort savings, we free up their time to concentrate on their main functions.
• Compliance: To lower the possibility of fines and penalties, we can assist in making sure a company or organization complies with all applicable laws and regulations.
• Cost-effectiveness: Hiring and training internal workers to perform VAT-related duties may prove to be more expensive than using our professional services.
• Technology availability: To automate and optimize the VAT process and increase its accuracy and efficiency, we have access to cutting-edge software and technology.

For UAE nationals building their own homes, SPK Auditors can assist in obtaining their refund.

• VAT on supplies will be charged to a UAE citizen who is building their own home in the country during the construction phase.
• Within six months of moving into the new residence or, if that date comes first, the completion certificate issued by the relevant Emirati entity, a claim for a refund of the VAT paid can be made.