How will VAT affect Dubai’s booming real estate market in 2023?
akhilcsseo@gmail.com
October 28, 2024
The implementation of Value-Added Tax (VAT) at 5% in the UAE and across the Gulf Cooperation Council (GCC) countries from 1 January 2018 represented one of the biggest taxation reforms in the region. As a key driver of the UAE economy, accounting for almost 13% of GDP, the impact of VAT on Dubai’s thriving real estate sector has been closely watched.
In 2023 and beyond, what effect will VAT have on Dubai real estate for buyers, sellers, developers, renters and real estate agents? Should you be considering VAT earlier when devising your UAE property plans?
Key VAT impacts on Dubai real estate
For those purchasing or renting property in Dubai, the main VAT effects are:
- 5% VAT added to purchase cost of off-plan and secondary/resale homes
- 5% VAT on developers’ annual service charges for communities
- VAT not applied on residential rent costs
Meanwhile for real estate developers and agents, VAT also changes certain factors around property transactions including:
As VAT experts in UAE real estate, Bazaar Accounting can help all entities – buyers, sellers, landlords, tenants, developers and agents – understand how to account for VAT correctly.
VAT on buying, selling and renting property in Dubai
Property Type | Transaction | VAT Applicable? | Notes |
| Residential (Apartments, villas, townhouses, etc.) | Purchase (Off-plan or resale) | 5% on sale value above AED 375,000 | Applies to all freehold and leasehold properties. |
| Residential | Rental | No | |
| Commercial | Purchase (Off-plan or resale) | 5% | |
| Commercial | Rental | 5% | |
| Annual Ownership Costs | Service Charges | 5% | Covers maintenance, repairs, and communal utilities. |
VAT effects on Dubai developers and real estate agents
Stakeholder | VAT Implications | Notes |
| Property Developers | * VAT Registration: Required if taxable sales exceed AED 375,000 | |
| * VAT on Sales: 5% on commercial and tourism properties | Residential sales are also subject to 5% VAT (as mentioned earlier) | |
| * VAT Reclaim: Can reclaim VAT incurred on construction and fitting out costs | This offsetting provision helps developers manage costs | |
| * Accounting & Filing: Quarterly VAT accounting and filings are necessary | Consider professional assistance to manage this complex process | |
| Real Estate Brokers | * VAT on Commission: 5% VAT applies to commission fees earned on property sales | |
* VAT Reclaim: Can reclaim VAT on business expenses | ||
* VAT Registration: Required if taxable sales exceed AED 375,000 |
Does VAT make Dubai property investment less attractive?
For all the VAT impacts covered, has it dampened demand for Dubai real estate since 2018 both locally and from overseas investors? The statistics suggest not.
Dubai property prices continue rising healthily as the emirate cements status as the Middle East’s top global city and regional safe haven hub. Residential sales prices are up over 70% since VAT arrived in 2018 right through 2022. Rents are also climbing sharply in line with accelerating population growth and employment opportunities.
As a tax-free environment previously, even just 5% VAT was a major shift for Dubai. However detailed planning, extensive awareness campaigns and a booming economy has enabled relatively smooth adoption.
For buyers and investors, they recognize that paying just 5% VAT in Dubai remains modest compared to other major cities like London, Singapore or Sydney. It does not deter investment in what remains a high growth market underpinned by world-class infrastructure and lifestyle perks.
Do you need a VAT consultant in Dubai?
Since Value-Added Tax (VAT) launched across the UAE on 1 January 2018, the question often asked is: do I actually need tax advisory help for my Dubai business or property affairs?
Many assume only multinational firms or high net worth individuals owning multiple Dubai homes require tax expertise. Yet in reality, VAT impacts and obligations apply right across the spectrum regardless of your size or sector.
Mistakes risk fines of up to AED 50,000 under the UAE tax authority Federal Tax Authority (FTA). Reputational damage and cashflow issues from getting VAT compliance wrong can also severely impact small and medium-sized companies.
As leading VAT consultants in Dubai, Bazaar Accounting is perfectly placed to advise whether you require specialist assistance. Read on to learn more about typical scenarios.
Bazaar Accounting offers an initial no-obligation review of your VAT accounting position. Contact us to book in a consultation with one of our senior VAT advisors.
