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What is the VAT capital asset scheme in the UAE?

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A rule in Articles 57 and 58 of the VAT Executive Regulation for single items of expenditure of AED 5,000,000 or more, excluding VAT, with a useful life of at least 10 years for buildings or 5 years for other assets. Input VAT recovered is monitored for 10 or 5 years and adjusted if taxable use changes.

On this page
  1. Staged payments count together
  2. The register
  3. How SupaJack Construct helps
  4. Related tools and guides
  5. Questions people ask

Staged payments count together

Smaller staged payments that together reach AED 5,000,000 count as one item where they are for buying or constructing a building, extending, refurbishing or fitting out a building, or assembling goods supplied in components. A building constructed through monthly certificates is therefore usually a capital asset for its owner.

The register

The owner keeps a capital asset register recording the input VAT in year one and each adjustment. If the asset is sold or destroyed early, the scheme stops in that tax year.

How SupaJack Construct helps

Certificates and invoices are kept per project, so an owner or developer can add up the staged payments for a building and the VAT on them for its capital asset register.

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 mixed-use building for AED 40,000,000 plus AED 2,000,000 VAT, paid through monthly certificates. It recovers 80% in year one because 80% of the use is taxable. If taxable use falls to 60% in year four, it repays part of the recovered VAT for that year under the scheme.

Questions people ask

What is the value threshold?

AED 5,000,000 excluding VAT.

How long are buildings monitored?

10 years.

Do staged payments count together?

Yes, for constructing or fitting out a building.

Sources

  1. Executive Regulation of Federal Decree-Law No. 8 of 2017 on VAT (Ministry of Finance)
  2. FTA VAT Guide: Real Estate (VATGRE1)

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