VAT on Real Estate Agent Commission in UAE

The VAT has been implemented in the UAE at the dawn of the new year 2018. VAT on Real Estate impacts every nook and corner of life in UAE. VAT for residential buildings have been exempted or in some cases zero-rated.

However, there is a 5% VAT on commercial buildings.

VAT on Real Estate

Let’s have a look at some of the main implications of the VAT on real estate.

Any piece of real estate which is a part of sale/lease or transferred as a right will be considered as a supply.

Residentials Exempted: Buildings constructed for occupancy by individuals and used as a place of residence are considered Residential. Supplies of new residential buildings for the first three years of its completion has been zero-rated under VAT.

Commercials Not Exempted: Buildings run as commercial and service centers like hotel, motel, bed and breakfast centers, hospitals etc., service apartments providing additional services other than lodging, and buildings which are not fixed to the ground like mobile homes come in the category of commercial buildings.

Vat Payment For Commercial Property Buyers User Guide

Non-residential buildings like shops, warehouses, hotels, and the ones mentioned above are subject to 5% VAT.

Residential owners do not have to register for real estate VAT. Any other building owner with supply value greater than Dh 375,000 for the previous year will have to register for VAT.

VAT on Rent

is VAT applicable on rent in UAE?

Rent of a residential building will not attract VAT. However, renting a commercial building will be liable for the mandatory 5% VAT.

Also, residential property leased out to a non-resident on a short-term basis (six months or less) shall be considered commercial.

VAT on Real Estate Agent Commission (or Brokers)

Registered real estate agents are liable to charge VAT tax irrespective of residential or commercial properties for their services. The commissions for services relating to lease/rent, sales agreement, managing property etc are bound to increase after VAT.

Hence, we see although residential buildings have been exempted from the VAT in UAE, the impact of VAT on real estate agent commission and other things will affect occupants and owners indirectly.

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