New Residence VAT Refund Scheme in UAE

Tally Solutions | Updated on: March 2, 2022

Under VAT in UAE, the UAE Government has proposed a VAT refund scheme for UAE nationals when they construct a new residence. Let us understand the new residence VAT refund scheme in detail.

What is the new residence VAT refund scheme for UAE Nationals?

The new residence VAT refund scheme is applicable to UAE nationals who newly construct a building to be used solely as a residence by the person or his/her family. This is applicable when the person owns or acquires land in UAE on which he builds or commissions the construction of his own residence. Under this scheme, such a person will be entitled to claim a refund of the tax paid on the expenses of constructing the residence.

What are the conditions to be eligible for this scheme?

The conditions to be fulfilled in order to be eligible for this scheme are:

• The claim should be made by a natural person who is a UAE national.
• The claim should relate to a newly constructed building to be used solely as residence of the person or the person’s family.
• The claim should not be made in connection with a building which will not be used solely as a residence by the person or his/her family.

For example: A hotel, guesthouse, hospital, etc.

When should the refund claim be made?

The refund claim under this scheme should be lodged within 6 months from the date of completion of the newly built residence. A newly built residence is considered as completed on the date the residence becomes occupied or the date when it is certified as completed by a competent authority in UAE, whichever is earlier.

Which are the expenses on which refund can be claimed?

The expenses on which refund of VAT paid can be claimed under this scheme are:

• Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of the residence.
• Building materials, being goods of a type normally incorporated by builders in a residential building or its site. This does not include furniture or electrical appliances.

What happens if the person later uses the property for commercial use?

When a person who has claimed refund of VAT under this scheme, later uses the property for commercial use, he/she will be required to repay the tax that was refunded earlier.

The new residence VAT refund scheme is an attractive scheme for UAE nationals who newly construct their residence in UAE. They can reduce the expenditure incurred on account of VAT paid on the expenses of constructing the new residence. It is also a measure by the UAE Government to assist UAE nationals to construct residences. UAE nationals can note the conditions of this scheme and use it for their benefit.

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