Is a rent-free period given for a tenant's fit-out subject to VAT in the UAE?
It depends on what the tenant gives back. The FTA real estate guide says a rent-free period given for nothing is not normally a supply. If the tenant agrees to refurbish the property in return, it is a barter: the landlord supplies the rent-free period and the tenant supplies the works.
On this page
Front-loaded rent
A 12-month lease with the first month 'free' but rent spread over 11 months is not a rent-free period for VAT. VAT applies to the total rent received either way.
Landlord contributions
A simple landlord contribution to a tenant's fit-out costs is not a supply by the tenant unless the tenant is contractually obliged to do something in return.
How SupaJack Construct helps
Fit-out contractors raise their invoices to the party that engaged them, with the VAT and TRNs needed by whichever side recovers it.
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 landlord gives a retailer six months rent-free, worth AED 300,000, in return for the retailer upgrading the shopfront. That is a barter. The landlord's commercial rent-free supply and the tenant's refurbishment supply are each valued at AED 300,000 and carry 5%.
Questions people ask
Is every rent-free period a supply?
No, only where something is given in return.
Are landlord contributions supplies?
Not unless the tenant must do something in return.
What if rent is just spread over fewer months?
VAT is on the total rent received.