Dubai: In the residential freehold space, all transactions involving a developer and a buyer have been set at 0 per cent. The other big plus for residents is the fact that even rental agreements on homes come under the 0 per cent banner.
The decision by the federal authorities is pitch perfect for the property market. Any tax on transactions involving homes could have acted as a speed-breaker on buying activity over the short- to medium-term. It could have nullified the steady gains in buying, especially in the off-plan space, recorded in the last 16 months.
But the 0 per cent does not apply to a “serviced apartment for which services in addition to the supply of accommodation are provided”, the tax authority states. It will also not apply to “any building that is used as a hotel, motel, bed and breakfast establishment or the like”.
Developers, however, will need to keep one thing in mind. Once the residential project is complete, they must ensure that all units are sold within three years of that. Any unit or units that get sold after the cut-off will have to bear the full 5 per cent VAT.
On commercial property (for selling or leasing), the basic 5 per cent tax rate applies without any exceptions.
With mixed-use properties, rent or sale of a residential part shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply, according to the VAT guidelines. “The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5 per cent.”
