VAT Treatment on Residential and Commercial Real Estate

Yarab A | Updated on: July 12, 2022

• VAT treatment on residential property
• VAT treatment on commercial real estate

In Oman, the real estate supply is taxable at a standard rate of VAT. Right from undeveloped land to a building attached to land is included within the scope of real estate. However, certain real-estate supplies like undeveloped land are exempt from VAT. To know more about what’s taxable and exempted from VAT, take a look at the articles below.

In this blog, we will discuss VAT treatment on residential and commercial property.

VAT treatment on residential property

A residential real estate is defined as any property or building or part of a property or building designed and intended for residential purposes. It has the required approval from the relevant competent authority.

In simple words, any property such as a residential house, apartment etc., that is intended for residential purpose is classified as a residential property. Any property of the following nature will not be considered as residential property. It is just an indicative list, not an exhaustive list.

• Any property or building that is used as a hotel, tourist compound, industrial compound, commercial compounds, bed and breakfast establishment, hospital etc.
• Any serviced apartment (e.g., hotel apartments)
• Any structure that is not fixed to the group and can be moved without damage

To simplify this, we have summarized the properties into residential and non-residential in the table below.

Rate of VAT on residential property

Only the first sale of residential property will attract a standard VAT rate. Any subsequent sale of residential property will be exempt from VAT. Similarly, rental of residential property will be exempt from VAT.

The rental of a residential property that by agreement gives the right to occupy a property for residential purposes will be exempt only if it meets the following conditions:

• The right to occupy the property is for a continuous period of more than 3 months
• The agreement is in accordance with the relevant tenancy laws in Oman

VAT treatment on commercial real estate

Any property other than a residential property and underdeveloped land is defined as commercial property. In simple words, any property other than the following will be classified as commercial property:

• Any building, or part of a building, designed and intended for residential purposes and has the required approval from the relevant competent authority
• Undeveloped land - A bare land that has no man-made structures or partially completed structures on it, above the surface or in the ground below the surface

The supply of commercial real estate, whether for sale or lease, is subject to VAT at the standard rate of 5%. It taxed on the total consideration received for the supply of commercial real estate. Since the supply of commercial property is taxable, the businesses can recover input VAT paid on all the expenses or the cost incurred in relation to such supply.

Given the different nature of real-estate supplies, determining if VAT is applicable or exempt often becomes a little complex. Businesses need to understand the different exemptions provided in the law and apply those when making the supply. If it is not rightly classified, it could lead to wrong VAT treatment and invite penalties and fines.

TallyPrime is a complete business management software with a VAT solution for Oman. With 3-4 simple steps, you can get started VAT and invoicing in a few mins. You can record and generate tax invoices, print bilingual tax invoices, manage all types of supplies, generate accurate VAT returns, and much more using TallyPrime.

Read more on Oman VAT:

• Elements of Tax Invoice – Simple and Comprehensive
• Input Tax Deduction on Goods Lost, Damaged, or Theft
• Value of Imported Goods in Oman