If you are planning to invest in commercial property in UAE and wondering about VAT on Commercial Property in UAE. VAT is an indirect tax that applies to goods and services. If you are planning to buy an apartment, rent, or launch an Airbnb, this guide will provide you with valuable information on VAT on property in Dubai.
What is VAT and How does it Apply?
VAT on Commercial Property in UAE (VAT) was introduced in the UAE in January 2018 at a standard rate of 5%. It applies to most goods and services, including commercial real estate. Any non-residential property like offices, shops, warehouses, hotels, and serviced apartments is classified as commercial. Both the sale and lease of these properties are subject to VAT.
Who Must register for VAT?
If your annual taxable supplies (sales, rent, services) exceed AED 375,000, you must register for VAT with the Federal Tax Authority (FTA). If your turnover falls between AED 187,500 and AED 375,000*, you may register voluntarily.
This requirement applies to landlords and businesses that deal with VAT on commercial property in UAE. Even foreign owners of UAE commercial property must register if the property is rented or sold locally. Businesses can reclaim the 5% VAT paid on the purchase or lease of commercial property, as long as it’s used for taxable business activities. However, if the property is partly used for non-business or exempt activities, only a portion of the VAT may be reclaimed.
For high-value properties (worth over** AED 5 million***), the Capital Asset Scheme applies, where VAT recovery is spread over 10 years. Understanding how recovery works is an important part of managing VAT on commercial property in UAE effectively.
Types of VAT in UAE
Depending on the nature of supplies, VAT on property in Dubai is classified into three categories:
Standard Rated VAT
A 5% VAT applies to most goods and services supplied or imported into the UAE. Registered businesses can also recover the VAT they pay to their suppliers, subject to certain conditions.
Zero-Rated VAT
Although the VAT rate is 0%, these supplies are still considered “taxable supplies,” meaning businesses can claim input VAT. Zero-rated supplies include:
- Exports of goods and services
- International transport services
- First supply of residential buildings within three years of completion
- Precious metals like gold, silver, and platinum (investment-grade)
- Educational and healthcare services (if conditions are met)
VAT-Exempt Supplies
Some goods and services are exempt from VAT altogether, meaning VAT is not charged and businesses cannot reclaim input VAT related to them. Exempt supplies include:
- Certain financial services
- Local passenger transport
- Residential buildings (other than zero-rated first supply)
- Bare land
Get Registered With Dhanguard
This split ensures fair taxation without burdening residents. Understanding how VAT on commercial property rent in UAE works is essential for landlords, tenants, and investors. Whether you are buying, selling, or renting, the 5% VAT applies to most commercial transactions and related services. The good news is that VAT paid can often be reclaimed if the property is used for taxable business purposes, making compliance less of a burden.
If you’re planning to invest or already own commercial property, staying compliant with VAT rules will save you from penalties and help you manage costs better. Understanding VAT on commercial property in UAE is key to making the right decisions as a landlord, tenant, or investor. And if you’re unsure about the registration process, Dhanguard can help you with VAT registration in UAE, ensuring your business stays on the right side of the law.
DhanGuard: All-in-One Solution for Business Setup in Dubai, UAE
DhanGuard is your ultimate one-stop solution for all your business needs. Whether you’re planning to set up a new company or expand your existing business in the UAE, we’ve got you covered with our comprehensive range of services. From Business Setup in UAE and Company Formation in Dubai to managing your financial and legal compliance, we provide everything you need under one roof.
Our services include:
- Company Formation in UAE and Dubai
- Opening a Business Bank Account in UAE and Dubai with a 99% success rate
- VAT & Corporate Tax Compliance
- Accounting, Bookkeeping, and Auditing Services
- Trade License Renewal
- Golden Visa Assistance
Let DhanGuard make your journey of Business Setup in Dubai seamless and hassle-free!
