Can a developer recover the VAT it pays contractors in the UAE?
Usually yes, in full. The FTA real estate guide says VAT on developing new commercial real estate is recoverable because its supplies are taxable, and VAT on building a residential building is recoverable because it relates to the zero-rated first supply. Later exempt leases are ignored for that recovery.
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When recovery is lost
Bare land sold as bare land is exempt, so VAT on costs tied to it is not recoverable. Repairs and maintenance on residential property after the first supply relate to exempt supplies and are not recoverable.
Cash flow on long projects
Developers recover VAT period by period during construction, so the VAT on each certificate comes back through the return. Late or wrong tax invoices from contractors delay that recovery.
How SupaJack Construct helps
Contractors' progress invoices carry the TRNs, certificate reference and VAT the developer needs to recover the tax, and are raised only from approved certificates.
Related tools and guides
See the VAT guide for contractors, the VAT calculator, the payment certificate calculator, the retention calculator, finance and VAT in SupaJack Construct, the answer on whether a payment certificate triggers VAT and the meaning of e-invoicing.
Worked example
A developer builds a residential tower and pays its contractor AED 60,000,000 plus AED 3,000,000 of VAT over two years. It recovers the AED 3,000,000 through its returns, because the first sales of the apartments are zero-rated.
Questions people ask
Is VAT on a residential tower recoverable?
Yes, through the zero-rated first supply.
Does a later exempt lease claw it back?
The guide says later supplies are ignored for that recovery.
Is VAT on bare-land costs recoverable?
No.