The Federal Tax Authority in the UAE defines a residential building for VAT purposes as a residential building or part thereof prepared and designed to be occupied by a number of individuals, including any building occupied by a person as his main residence. The Federal Tax Authority (FTA) adds that the residential building does not include:
A commercial building for VAT purposes is defined as any building or part thereof other than a residential building as:
The Federal Tax Authority (FTA) in the UAE has set the conditions and controls for the real estate sector with regard to VAT. Commercial real estate supplies, whether sales or rent, are subject to the basic rate of VAT, i.e., 5%, while residential real estate is exempted from the tax in general, except for the first supply during the first three years of its construction, to be subject to the zero rate.
For hassle-free VAT Services in UAE? Click here to send an inquiry.
According to the Federal Tax Authority (FTA), the owner of a residential building does not register for VAT if he does not have other business activities. If he has any other business activities, he must register.
The owner of any non-residential building must register for VAT if the amount of his supplies exceeds the VAT Registration Threshold, in the previous 12 months, or his revenues are expected to exceed in the next 30 days.
Supply the details of the person who is operating the real estate business. whether he is an individual or a business, details of the applicant must be submitted to the tax experts.
The applicable VAT amount on the sale of the property should be declared (mentioned in the tax invoice provided by the seller.)
The Tax Registration Number of the seller should be furnished to the tax expert as mentioned in the tax invoice.
The official property number as provided by the seller or the land registration department should be furnished.
This is the purchase date of the commercial property as mentioned on the tax invoice.
After providing the above-mentioned details to a tax expert, they will forward all the information to FTA which will scrutinize the information provided. After the approval, the entity is registered for VAT in UAE.
According to Federal Tax Authority, a taxable person also requires additional documents or authorization, depending on the business activity, the jurisdiction of the business, and more such factors.
A commercial property owner that misses the VAT registration UAE cutoff date or fails to complete the VAT registration process under the deadline set by Federal Tax Authority must settle a fine not less than AED 20000 (estimated fine) To determine exact penalties seek the guidance of a VAT consultant in UAE.
The supply of a residential building for the first time within three years of its construction is subject to a zero rating. While all subsequent supplies are exempted from the tax, even if they were during the first three years from the completion of its construction. All supplies of commercial buildings are subject to VAT at the rate of 5%, and it includes all non-residential buildings or any parts thereof.
There are dual-use buildings, i.e. residential and commercial at the same time. The process of selling or renting the residential part of the building is subject to the zero-rate in the event of a first supply, or exempt from tax if there is a subsequent supply. And if the commercial part of the building is sold or rented, it becomes subject to VAT at the rate of 5%.
The building owner must divide the tax he paid in the event of a tax-exempt supply. Therefore, it is possible to recover the portion related to the taxable supply, i.e., that which is subject to the zero rate, as well as that subject to the 5% rate. In addition to the above, renting a residential building is exempt from tax, but renting a commercial building is subject to VAT at a rate of 5%.
If the service applicant is eligible to recover VAT and has original invoices, this is not sufficient to claim a refund of his tax. Having a comprehensive knowledge of when applications are submitted and the amounts are also very important elements.
The VAT refund system can help the service seeker recover his VAT in the UAE. However, there are some requirements and criteria that must be met in order to be eligible for this.
The owner of a residential building cannot recover the VAT related to the costs he incurred on the supply of the tax-exempt residential building, but the owner of a commercial building has the right to recover the VAT related to the costs he incurred on the supply of the building.
The registrant’s tax registration shall not be Deregistered unless the following conditions are met:
It is advisable for businesses to seek the expert services of trusted Tax Consultants in UAE to seamlessly register for VAT and to ensure compliance. VAT Registration UAE are prominent tax advisors. We provide VAT registration services for commercial property and other Taxable Persons. Therefore, contact us today and we shall be glad to assist you.
You can seek the help of our VAT experts in UAE, as they can help you register VAT for commercial property. We give necessary VAT-related information also provide full-fledged assistance with regard to VAT; we are right here to make VAT registration a smoother experience for businesses. Call us now for further consultation.