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How to Pay VAT on Commercial Properties in UAE?

Confusions

A lot of confusion has been seen in the minds of the people regarding VAT in UAE since it got implemented. People are not actually well aware of working and criteria they have to meet in order to pay VAT. This might be because it is really new.

Read more: What You Should Remember About VAT Registration

Discussions

A lot of discussions are also occurring on the topic of the VAT. So that this might get explained to the people in the best possible manner.

Commercial property- not Exempt to VAT

The commercial property of the people in the UAE is not exempt from the VAT. People having commercial property are obliged to pay VAT, no matter land is on the lease or has been purchased.

The tenants, as well as purchasers, have to pay VAT, no commercial property has been forgiven from the VAT. So, everyone who comes under the category must pay VAT which is 5percent.

Issue a Tax Invoice

The seller is responsible to issue a tax invoice to the purchaser while selling the commercial property. A lot of people do not consider it attentively but they should pay attention to this thing.

It is very important and they should not close their eyes to this topic at all.

Sellers and Purchasers- Register for VAT

Both the sellers as well as the purchasers must register for VAT.

If the annual rent of the person exceeds the tax threshold, the seller must get registered for VAT. The threshold for it is Dh375,000 per year. So, all the sellers must see if their annual rent is exceeding the threshold or not. If it is exceeding the threshold, e must register for VAT, or else he will get punished when get caught.

Note that not only the companies have to register for VAT but also vat registration in UAE  is a must for the people having the commercial property as well.

Owners are also Liable to Register for VAT

This confusion might be in the minds of so many people as the people might be thinking that the owners of the commercial property do not have to pay tax No, this is not true.

All owners of commercial property are liable to register for VAT because sale of commercial property is taxable supply so, register for it is mandatory.

There should be specific VAT provisions for the property sale agreements after January 1. This should be the responsibility of the one who purchases.

VAT should be declared by sellers on purchase price as output VAT whereas purchaser should claim it as input VAT.

Both the purchaser, as well as the seller, should register for VAT before doing any transaction. But the first move is to be made by the purchaser to declare on the Federal Tax Authority’s e-services portal.

Requirements for the Purchaser

  • seller’s tax registration number
  • the VAT amounts
  • the commercial property plot number
  • the date of sale and the Department of the land where the property is registered.

The amount will be considered as output VAT for seller whereas it will be considered as input VAT for purchasers.

Exceptions regarding the Commercial Property VAT in Dubai, UAE

Now here is an exceptional form all that we read above;

The VAT law In UAE says that if the commercial property is being sold with an ongoing tenant then the sale will be considered is zero-rated. This means that no VAT will be applied to the person who is occupying the property after its sale. Note that both the parties need to be registered for this as well. In addition to that, there are some rules & regulations in this case as well. All of these rules are to be followed by the people who are in the whole business.

Learn More: Registration in UAE VAT: Conditions and Requirements

Conclusion: How the VAT work in case of commercial property

This is how the VAT would work in case of commercial property. Although the commercial property is not exempt from VAT still there are some conditions in which VAT will zero-rated.

Zero-rated means that no VAT will be charged in those cases.

The people must get registered for VAT and they should see where they stand as well. this will help them in getting the idea of whether they should pay the VAT or not because the confusion might waste your money. so, make sure that all of your confusion is clear before you proceed with any sale or purchase. All these things will really prove to be helpful in the future in the case of the VAT.

Also, you want to know: Steps to Follow in Filing Your VAT Return in UAE

VAT consultants in UAE

Vat consultancy agencies should be consulted that a Tax agent in UAE guides you about all the nitty and gritty of the VAT.

For more than 30 years, Farahat & Co. has been one of the leading firms in the UAE that deals with accounting. It continues as we remain to be known even with the new tax regime that has found our country. For more information and consultation with regard to your needs in VAT accounting, book an appointment with us here.

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions. Read more