VAT on UAE property: what applies to homes
How the Federal Tax Authority treats VAT on residential and commercial property.
0% income tax and 0% property tax* *T&Cs apply. The UAE charges a 5% VAT on goods and services. This guide summarises how the Federal Tax Authority (FTA) treats VAT on real estate, based on its Real Estate VAT Guide dated April 2021.
- 01A first supply of a new home within 3 years of completion is zero-rated.
- 02Resale of a residential property is exempt from VAT.
- 03Commercial property is subject to VAT at 5%.
- 04Service charges are subject to VAT at the standard rate.
The summary table
The FTA guide gives this summary of VAT on real estate:
- New residential property: 0%.
- Existing residential property: exempt.
- Commercial property: 5%.
- Bare land: exempt. Covered land: 5%.
First supply of a home
The first supply of a residential building is zero-rated. It includes a sale or a lease, but it must be made within 3 years of the building's completion date. Any later sale or lease, even within 3 years, is not the first supply and is exempt from VAT.
What is not a residential building
The guide says a residential building does not include a hotel or a similar establishment, or a serviced apartment where services beyond accommodation are provided.
Service charges
Charges made to owners or tenants for the upkeep of communal areas are subject to VAT at the standard rate. They are not payments for a residential building, so they are not zero-rated or exempt.
Check the current guidance
The guide is dated April 2021. Confirm the current treatment with the FTA or a tax adviser before you buy.
Tax position
0% income tax and 0% property tax*: the UAE does not levy income tax on individuals, and income from real estate held in a personal capacity, without a commercial licence, is outside UAE Corporate Tax.
*T&Cs apply.
Talk to an advisor
An iRealtor advisor can explain the steps and shortlist homes in Abu Dhabi and Dubai, including off-plan launches.
This article is general guidance, not tax, legal or financial advice.
FAQs
Do I pay VAT when I buy a resale home in the UAE?
According to the FTA guide, the supply of a residential building other than the first supply is exempt from VAT.
Is VAT charged on a new home?
The first supply of a residential building within 3 years of completion is zero-rated, which means a 0% rate.
Is there VAT on service charges?
Yes. The FTA guide says service charges for communal areas are subject to VAT at the standard rate.
