Place of supply of real estate under UAE VAT

The supply of real estate including sale and tenancy contracts is a supply of goods. As the supply of real estate does not involve movement of the real estate, the place of supply will be the place where the property is located. Hence, the place of supply of real estate will be UAE and UAE VAT will be applicable on the supply.

For example: Noor Builders, registered under VAT, constructs a residential building in Khadmat Street, Dubai. It sells the building to a consumer, Mr. Abdul, after 1 year of the completion of the building’s construction.

Here, the place of supply of the residential building will be UAE and UAE VAT will be applicable on the supply. As this is a supply of a residential building within 3 years of the completion of construction, the supply will be a zero rated supply.

To learn more about VAT on supply of residential buildings, you can refer our article 'VAT on supply of residential buildings'.

Place of supply of real estate related services in UAE

Where a supply of services is considered to be related to real estate, the place of supply of the services is where the real estate is located. Therefore, any services which are related to real estate located in the UAE will also be treated as supplied in UAE and UAE VAT will be applicable on the supply.

A supply of services is considered to relate to real estate where the service is directly connected with the real estate, or where it is the grant of a right to use the real estate.

Supply of services directly connected with real estate includes:

• 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 licence 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 and similar work.

For example: Leo Property Brokers LLC, registered under VAT in UAE, provides brokerage services to Rohan Solutions LLC for real estate which is locate in UAE. Here, the place of supply will be UAE and the brokerage commission will be subject to VAT at the standard rate of 5%.

Services which are not considered to be directly related to real estate will be subject to the default place of supply rules, i.e. the place of supply will be the place of residence of the supplier. To learn about the default rule to determine the place of supply of services, you can refer our article ‘Place of supply of services’.

Some examples of services that are not considered to directly relate to real estate include:

• Secondment of staff to a building site, i.e. assigning of employees of one organisation to another organisation on a temporary basis
• Advice or information relating to land or property markets generally
• Drawing up plans for a building that does not relate to a specific site
• Management of a property investment portfolio
• The supply of storage of goods in a property without a right to a specific area for the exclusive use of that customer
• Advertising services, including those that involve the use of a billboard
• General legal advice on real estate related contracts

For example: Ali Advocates, registered in Abu Dhabi, provides legal advice to a business, Ahmed Solutions LLC, whose place of residence is Dubai, with regard to the lease of their office in Saudi Arabia.

Here, the place of supply of the legal service will be the place of residence of the supplier, i.e. UAE, as it is not a service directly related to real estate. Hence, it will be a taxable supply at the standard VAT rate of 5%.

Hence, the place of supply of real estate as well as services directly related to real estate will be the place where the real estate is located. On the other hand, the place of supply of services which are not directly related to real estate will be the place of residence of the supplier.