New taxation scheme came into effect with the first minutes of the New Year. Read more to find out, what properties are taxed now.
The 5 per cent value added tax (VAT) became a reality in Dubai already in the first seconds of the new 2018, and although residential real estate units as a whole are either exempt from VAT or subject to zero rate, commercial real estate units will automatically add 5 per cent to their value, which can indirectly affect residential real estate sector as well. So, let's look at the details.
The first thing worth paying attention to for residential real estate sellers and buyers is the following. Despite residential sales and rental not being subject to VAT, utilities and property management services will be taxed.
So, what is subject to VAT?
- Any commercial property in the UAE, including offices, retail units, warehouses and even car parks, are now taxed when either leased or sold, unless this property unit is part of the residential property.
- Besides, non-resident landlords and/or tenants will also have to pay 5 per cent VAT for commercial property. If the landlord and tenant are both non-residents, the landlord has to register for VAT provided tha the property is in the UAE.
- Lease bonuses, such as free office fit-outs, could be subject to VAT.
- VAT will also be applicable to rents payable under commercial rental contracts started last year in respect of rents in 2018.
- Any property, which is not fixed to the ground and hence is movable, would also be considered commercial for VAT purposes. Mobile homes, for example.
- Hotels and serviced apartments are also subject to VAT.
- Residential units leased out on a short-term basis to non-residents also falls under the commercial category. If a lease is less than six months and the person living there doesn’t have an Emirates ID, it would be deemed commercial from a VAT perspective.
About how the introduction of VAT will affect the real estate market in Dubai, read in our new materials on the subject.
On issues concerning investment in Dubai and Moscow real estate, please contact Oleg Lavrik, the Head of IMEX Real Estate and Chairman of the Investment department at the Russian Business Council in Dubai on:
+971 502528188 (Viber, WhatsApp, Telegram, IMO)
IMEX REAL ESTATE BROKER LLC UAE
Office 2502, Marina Plaza, Dubai Marina, Dubai, UAE
Tel. +971 4 395 1911