Real estate is generally considered to be property consisting of land or buildings, and includes :

  • ♦ Any area of land over which rights or interests or services can be created
  • ♦ Any building, structure or engineering work permanently attached to the land
  • ♦ Any fixture or equipment which makes up a permanent part of the land or is permanently attached to the building, structure or engineering work




  • ♦ The grant, assignment or surrender of any interest in or right over real estate
  • ♦ The grant, assignment or surrender of a personal right to be granted any interest in or right over real estate
  • ♦ The grant, assignment or surrender of a license to occupy land or any other contractual right exercisable over or in relation to real estate, including the provision, lease and rental of sleeping accommodation in a hotel or similar establishment
  • ♦ A supply of services by real estate experts or estate agents
  • ♦ A supply of services involving the preparation, coordination and performance of construction, destruction, maintenance, conversion or similar work




  1. 1. A commercial property – VAT Liability 5%
  2. 2. A new residential property – VAT Liability 0%
  3. 3. An existing residential property – VAT Liability Exempt
  4. 4. Bare land – VAT Liability Exempt
  5. 5. Covered land – VAT Liability 5%
  6. 6. A new charitable building – VAT Liability 0%
  7. 7. An existing charitable building – VAT Liability 5%
  8. 8. A property located within a Designated Zone – Out of scope



A residential building is a building which is intended and designed for human occupation. This includes:

  • ♦ Any building or part of a building that the person occupies, or that it can be foreseen that a person will occupy, as their principal place of residence
  • ♦ Residential accommodation for students or school pupils
  • ♦ Residential accommodation for armed forces and police
  • ♦ Orphanages, nursing homes and rest homes


A residential building is not:

  • ♦ Any place that is not a building fixed to the ground and which can be moved without being damaged
  • ♦ Any building that is used as a hotel, motel, bed & breakfast establishment, or hospital or the like
  • ♦ A serviced apartment for which services in addition to the supply of accommodation are provided
  • ♦ Any building constructed or converted without lawful authority.


A building is still considered to be a residential building if a small proportion of it is used as an office or work space by the occupants, if it includes garages and gardens used in conjunction with the property, or if it includes any other features that may be said to comprise part of the residential building


  • ♦ It is zero-rated
  • ♦ VAT incurred on costs relating to the first supply of the building should be recoverable in full
  • ♦ It includes a supply of the building by either sale or lease, but it must be made within 3 years of the buildings’ completion date
  • ♦ The completion date of a building is normally the date the building is certified as being complete by an appropriately qualified party.

However, if the building is occupied before this date, the date on which the building is occupied shall be taken to be the date of completion



  • ♦ The supply of a residential building other than the first supply, is exempt from VAT
  • ♦ This includes where the subsequent supply of the property is supplied within 3 years from the buildings’ completion
  • ♦ The supplier will be unable to recover any VAT on costs relating to such a subsequent supply

e.g. Agent fees, costs relating to the general upkeep and maintenance of the property



  1. 1. Charges to the owners or tenants of units within the community/building in return for the upkeep of the communal areas of the property will be subject to VAT at the standard rate
  2. 2. A labour camp will be considered to comprise of lodgings which are to be treated as residential buildings where:


  • ♦ The building or lodging is occupied by the employee as their principal place of residence. A person can only have one principle place of residence, although they may share that principle place of residence with other people
  • ♦ It is a building which is fixed to the ground and which cannot be moved without being damaged
  • ♦ The building has been constructed or converted with lawful authority
  • ♦ It is not a building which is similar to a hotel, motel, bed & breakfast establishment, or serviced apartment for which services in addition to the supply of accommodation are provided.


  1. 3. Where the employer charges the employee a form of consideration in exchange for the residential accommodation, this shall be treated as a supply for VAT purposes. The consideration received will either be zero-rated (in respect of the first supply of a residential building) or exempt from VAT.


Consideration may be received from an employee in a number of ways, including but not limited to:

  • ♦ A direct charge made to the employee for the accommodation
  • ♦ A deduction from the employee’s salary in respect of the accommodation
  • ♦ Provision of accommodation in lieu of the payment of a housing allowance to the employee


  1. 4. Where the employer does not make a charge to the employee for the provision of residential accommodation, any VAT incurred on costs may be recovered as a general overhead cost of the business.

The conditions to be met to recover the costs are :

  • ♦ It is a legal obligation to provide those services or goods to those employees under any applicable labour law in the UAE or Designated Zone
  • ♦ It is a contractual obligation or documented policy to provide those services or goods to those employees in order that they may perform their role and it can be proven to be normal business practice in the course of employing those people
  • ♦ Where the provision of goods or services is a deemed supply under the provision of the VAT Decree-Law.


  1. 5. The purchase of a residential building ‘off plan’ i.e. direct from the developer prior to construction of the property, or purchase of a partly completed residential building, shall be zero rated, as a future supply of a residential building or as it will be used for residential purposes


  1. 6. Farm houses which are located on agricultural land will be considered to be residential buildings where they are occupied, or intended to be occupied as a person’s principal place of residence and meet the conditions to be treated as a residential building.


  1. 7. The first supply of a building, or part of a building, which has been converted to a residential building will be zero-rated

The zero-rating will apply provided the following conditions are met:

  • ♦ The supply must take place within 3 years of the completion of the conversion
  • ♦ The original building which was converted, or any part of it, must not have been used as a residential building or comprise of a residential building within 5 years prior to the conversion work commencing.



The presence of shared or common facilities, or dividing walls or similar features in a residential building should not cause the residential building to be considered part of a pre-existing residential building.