VAT or Value Added Tax has been implemented in the UAE since the start of this year (2018) and it’s impact has been felt by all consumers residing and transacting in the country. Some real estate transactions are subject as well to VAT such as brokers fee while others exempted.

Here are some additional information regarding the VAT applicable on sale of Commercial Properties.

 

For the sale of commercial property, the 5% VAT is based on the Selling Price and both the Seller & the Buyer will have to be registered with FTA.

“The sale of commercial property is in itself a taxable supply and thus the registration thresholds apply with the sale price determining the threshold. The same applies to the purchaser, and the purchase price is a “vatable” expense and thus warrants registration. It is not only companies that have the liability to register for VAT; individuals who own or sell commercial property should also register for VAT in their individual capacity.”

“Property sale agreements entered into after January 1 should contain specific VAT provisions and demarcate the responsibility for VAT payment, usually by the purchaser. It is interesting to note that if provision is not made for VAT in the sale and purchase agreement, the purchase price is deemed to be inclusive of VAT in accordance with the UAE VAT law.”

“To proceed with a sale transaction of commercial property, both seller and purchaser would have to be registered. However, the purchaser will be the party making the initial declaration on the Federal Tax Authority’s e-services portal. The purchaser will require the seller’s tax registration number, the VAT amount (preferably by way of the tax invoice issued by the seller), the commercial property plot number (as reflected on the tile deed), the date of sale and the land department where the property is registered.”

As an exemption to the above, the UAE VAT law provides that in the event of a sale of commercial property “as a going concern”, meaning that the commercial property is sold with an occupying and ongoing tenant, such a sale will be zero-rated provided that both parties are registered for tax and the exemption is applied in accordance with and subject to the relevant rules relating to this exemption.”

Full Article “Paying VAT on Commercial Property” here: https://gulfnews.com/business/property/paying-vat-on-commercial-property-1.2243303

 

However, there will be No VAT on sale of leased commercial property by a taxable person

“Leased commercial property will not be considered a supply during its sale by the taxable person, therefore, it will not be taxable, the Federal Tax Authority (FTA) and Dubai Land Department (DLD) clarified on Tuesday.

Both the government entities emphasised that there has been a limited impact of value-added tax (VAT) on the UAE's real estate as majority of the transactions are either not subject to or exempt from the five per cent VAT. Currently, only the sale of vacant commercial properties and commercial property leases are subject to taxation.”

Full Article “No VAT on sale of leased commercial property by taxable person, says FTA” here: https://www.khaleejtimes.com/no-vat-on-sale-of-leased-commercial-property-by-taxable-person-says-fta

 

Here’s another article which may be of help to understand more about the VAT on supply of commercial property - https://tallysolutions.com/mena/vat-on-supply-of-commercial-real-estate/