VAT refund in UAE allows the UAE nationals to recover VAT incurred on construction expenses when constructing a new residential property for local use. To avail this refund, applicants are required to follow the prescribed formal process and meet the relevant Federal Tax Authority requirements. This VAT refund is not applicable on commercial buildings, investment buildings, or residential buildings bought from developers.
Eligibility Criteria for VAT Refund on New Residential Buildings
To be eligible for a VAT refund on new residential properties in UAE, certain requirements must be fulfilled. They vary from the eligibility of the applicants to the nature of expenditure incurred during construction:
- Nationality Requirement: Only UAE nationals are eligible applicants.
- Residential Use: The property has to be the principal residence of the applicant or immediate family. It is not for commercial use or for rent.
- Construction Stage: The refund is for new homes only and not for extensions or additions to already existing homes.
- Time Limit: The VAT refund claim should be within 12 months of the completion date of the property and its readiness for use, supported by a completion certificate from the relevant municipality.
Eligible VAT Expense Costs
The VAT refund on new residential properties is only claimable for certain categories of spending, which are associated directly with bringing the new residential property into existence. These include:
- Building Materials: Concrete, bricks, steel, glass, insulation material, plumbing material, wiring, and other materials utilized in the final building.
- Contractor and Construction Services: Contractors, architects, and engineers’ fees included in building the structure.
- Consultancy Fees: Charges for design, supervision, or planning work for professional consultants.
- Connection Charges for Utilities: VAT on the initial connection of electricity, water, and vat on telecommunication facilities to the property.
- Municipality Charges: Charges for building permits and fees for inspection services, if taxable.
Note that VAT on landscaping, appliances, furniture, and interior decoration is not recoverable because these do not constitute part of the construction process.
Read More: VAT on Real Estate in UAE
Non-Qualifying Expenses for VAT Refund
Although inexpensive as it is, some spending on new homes specifically qualifies for VAT exemption. They are:
- Luxury Items: Pools, gym equipment at home, or excessive finishes are not included.
- Household Goods: Carpets, curtains, appliances, or furniture.
- Maintenance Charges: Repairs or maintenance done after house completion.
- Purchase of Land: VAT on land or land charges is not recoverable.
Documents Required for VAT Refund Claim
Applicants will also have to furnish all supporting documents to accompany their VAT refund claim. They will be proof of payment as well as act as proof of entitlement:
- Passport Copy and Emirates ID: To determine the nationality and identity of the applicant.
- Completion Certificate: From the local municipality, showing the house to be completed and in an occupied status.
- Title Deed: Proof of property ownership of the residential building.
- Construction Contracts and Invoices: Original tax invoices with VAT indicated, contractor contracts, and payment receipts.
- Utility Connection Documents: Utility suppliers’ invoices and receipts.
These documents should be authentic, legible, and either in the Arabic language or translated into Arabic by a sworn translator.
How to Apply for VAT Refund on New Residential Properties in UAE
- Registration on FTA Portal: Register yourself for a user account on the Federal Tax Authority’s website.
- View VAT Refund Form: After completing your registration, visit the respective “VAT Refund for Newly Constructed Homes by UAE Nationals” section.
- Fill up the Online Application: Enter all the required information, add supporting documents, and verify data with official records.
- Submit the Application: Double-check all the entries and submit them. The FTA can also ask for further clarification or documents.
- Refund Decision and Payment: Once approved, the refund is processed and deposited to the applicant’s bank account. Processing will take 20 to 45 business days.
The applicants can track the status of their refund from the FTA dashboard. Communication in most instances is through email or online portal.
Read More: VAT on Commercial Property in UAE
Key Considerations to Ensure a Seamless VAT Refund Application Process
The following considerations are key a follow:
- Keep records at the commencement: Keep electronic and hard copies of all contracts and invoices in the process in the course of construction.
- Use FTA-registered suppliers: Proper TRNs (Tax Registration Numbers) require FTA-registered suppliers’ tax invoices from service providers.
- Consult a VAT Professional: Engage the services of a tax advisor thoroughly conversant with FTA procedure to avoid error and wastage of time.
- Monitor the deadlines: Make your claim at once when due within 12 months upon finalization.
Seek the Expert Services of Top VAT Consultants in UAE
To seamlessly determine VAT taxability in compliance with the VAT laws, businesses are advised to seek the expert services from premier consultants such as VAT Registration UAE.
FAQs: VAT Refund on New Residential Properties
Q1. Who qualifies to receive a VAT refund on new residential real estate in the UAE?
Only UAE nationals who build or have built a new residential property for their private (not rental or business) use qualify to obtain a VAT refund.
Q2. What expenses are covered by the VAT refund scheme?
Refundable items include building materials, contract work, engineering and consultancy charges, and utility connection charges. VAT on furniture, appliances, or luxury goods is not refundable.
Q3. When should a claim for a VAT refund be lodged?
The VAT refund application should be submitted within 12 months from the date of completion of the residential building as certified by a completion certificate issued by the municipality.
Q4. How do I obtain a VAT refund on a new property?
You have to register and log into the Federal Tax Authority (FTA) portal, fill in the refund form, and attach supporting documents such as invoices, title deed, completion certificate, and Emirates ID.
Q5. How soon before we will get the VAT refund?
FTA usually processes refund requests in 20 to 45 business days if all the documents are in order and accurate.
