Commercial properties will be taxed at 5%, says the UAE's Ministry of Finance.
The UAE Ministry of Finance (MoF) on Monday confirmed certain financial services, residential properties, bare land and local passenger transport will be exempt from value added tax (VAT).
In March, tax consultants who attended a VAT briefing by the MoF told Arabian Business that residential property sales and leases will be exempt from VAT, but not commercial properties.
The UAE is set to implement 5 percent VAT from January 1, 2018.
In an update on its website, the ministry said the VAT treatment of real estate will depend on whether it is a commercial or residential property.
Supplies, including sales or leases, of commercial properties will be taxable at the standard VAT rate of 5 percent, while supplies of residential properties will generally be exempt from VAT, it added.
“This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of newly-constructed residential properties within 3 years from their completion will be zero-rated,” the MoF said.
The ministry also said VAT will be charged at zero percent in the following categories: Exports of goods and services to outside the GCC; international transportation, and related supplies; supplies of certain sea, air and land means of transportation (such as aircrafts and ships); certain investment grade precious metals (such as gold, silver, of 99% purity); supply of certain education services, and supply of relevant goods and services; supply of certain healthcare services, and supply of relevant goods and services.
Content courtesy: arabianbusiness.com