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VAT on real estate can be divided into supply of residential property, commercial property, mixed use developments, bare land and charitable buildings. In our previous article 'VAT on supply of residential property' , we have learnt about the VAT treatment of supply of residential property. Similarly, let us learn what is meant by commercial property and VAT on supply of commercial property in UAE.
Commercial property is any land or buildings, which are not one of the following:
The supply of commercial property is subject to VAT at the standard rate of 5%. Here, supply of commercial property includes by way of sale or lease. Hence, VAT is applicable on the consideration received for the supply of commercial property.
Where the consideration for the supply of commercial property is payable in instalments, VAT will be applicable to each instalment paid. Since the supply of commercial property is a taxable supply, VAT paid on costs incurred for making the supply can be recovered in full.
VAT is to be collected and paid to the FTA by the supplier as usual in the following types of supply of commercial property:
In these cases, VAT will be collected by the supplier, reported and paid to the FTA in the relevant VAT return.
A special payment process applies only in the case where a commercial property is sold in UAE by any supplier other than the developer of that property. When commercial property is sold by a supplier other than the developer of the property, the steps to be followed for VAT payment on commercial property are:
Hence, supply of commercial property is subject to VAT @ 5%. As it is a taxable supply, VAT paid on costs related to the supply of commercial property can be recovered in full. When the commercial property is sold by a supplier other than the developer of the property, the VAT on supply of commercial property has to be paid by the buyer directly to the FTA. To learn more about VAT on supply of real estate, you can refer our article 'VAT on real estate' .