Is VAT charged on snagging works in the UAE?
Not when the original builder fixes the snags at its own cost. Section 12.4 of the FTA real estate guide treats that work as part of the original supply, so no further VAT is due. If the client pays a second contractor, or pays the original builder an extra fee, that is a new supply and 5% VAT applies.
Retention withheld for snags
Where the client keeps the retention permanently to cover snags, no VAT is due on that withheld amount. If the contractor already accounted for VAT on it, because an invoice was issued or the 12-month rule applied, it may use bad debt relief if it still considers the money owed, or a credit note if it accepts it is not owed.
Practical records
Snag lists, rectification dates and whether the work was free or charged decide the VAT outcome. A contractor should be able to show which snags it fixed at its own cost.
How SupaJack Construct records it
Work inspection records and handover snag lists sit with the project, and retention releases are tracked by tranche with their due dates, so the commercial record behind any VAT adjustment is on file.
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 contractor holds AED 150,000 of retention. The client finds snags and hires another firm for AED 60,000 plus AED 3,000 VAT, then keeps AED 60,000 of the retention. The second firm's work carries VAT. The AED 60,000 withheld carries none, and if VAT was already accounted for on it, the contractor adjusts.
Questions people ask
Does a free fix by the original builder carry VAT?
No. It is part of the original supply.
Is a charged fix by the original builder taxed?
Yes, as an additional supply at 5%.
What if VAT was paid on retention the client keeps?
Use bad debt relief or a credit note, as the guide describes.