Is residential rent or resale exempt from VAT in the UAE?
Yes, except the first supply. The FTA real estate guide says the supply of a residential building other than the first supply is exempt from VAT, by sale or lease. That includes later supplies made within three years of completion. VAT on costs that relate to exempt supplies cannot be recovered.
Effect on maintenance and fit-out costs
Costs for upkeep and maintenance after the first supply relate to the exempt supply, so a landlord cannot recover the VAT it pays contractors for that work. The contractor still charges 5%; the cost falls on the landlord.
Staff accommodation
Employers providing housing to staff must check whether they make an exempt supply of residential property to the employees, which the guide addresses separately. Contractors running labour camps should take advice on the specific arrangement.
How SupaJack Construct helps
Supplier bills record VAT separately and the recoverable amount feeds the VAT return, so a business can see which input VAT relates to exempt activity.
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 pays a maintenance contractor AED 40,000 plus AED 2,000 VAT to repaint a residential building it rents out. The rent is exempt, so the landlord cannot recover the AED 2,000. Its total cost is AED 42,000.
Questions people ask
Is commercial rent exempt?
No. Commercial property is standard-rated at 5%.
Does the maintenance contractor charge VAT?
Yes, 5%. The landlord cannot recover it.
Is the first lease of a new residential building exempt?
No. The first supply within three years of completion is zero-rated.