FAQ: Do I Need To Pay VAT On A Commercial Property?

Value added Tax (VAT) 5% was introduced all over UAE on January 2018 and since then there has been a lot of speculations surrounding VAT  implied on commercial and residential properties.

VAT on Commercial Property

• • Residential Property in Dubai; be it rental or for sale is exempted from tax where as commercial properties are obliged to pay tax during lease and purchase. A commercial property is issued with a Vat invoice when billing the annual rent and during commercial property sale transaction the seller issues a tax invoice for the purchase price.

• • It is mandatory for both seller and buyer to register for VAT. A seller is obligated to register for VAT when the rental transaction amount exceeds the mandatory tax threshold which is Dh375,000/- per year.

• • To have a precise idea: The firms who has taken a commercial property on lease is liable to pay VAT, also anyone who owns or sells commercial property are also required to register.

• • During a sale transaction of a commercial property, the purchaser will be the one making the initial declaration on the Federal Tax Authority e-services portal. The purchaser will need few significant details of the seller such as seller’s tax registration number, date of sale, the tax invoice issued by the seller, the commercial property plot number.

• • The seller should state VAT on purchase as output VAT and the purchaser should state as input VAT.

• • If the tenant is already an ongoing tenant and already occupied then the sale will be zero rated if both tenant and owner is registered for tax.

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