How does VAT affect residential real estate in the UAE

There is no VAT charged on residential real estate, but there are residence-related VAT charges that you need to know

28 Feb 2018, words by Aneesha Rai & Jithin Joy in The Guides

VAT in Dubai, UAE

While VAT doesn't affect residential properties, it might be worth to know that it will affect you in indirect ways. From maintenance charges to your home insurance, here is how VAT will affect you in 2018.

1. On brokerage services

If you're planning to buy or sell your property in Dubai through a broker, then you'll need to pay a VAT on services rendered to you as part of the brokerage fee. 

For example, If you sell your property through a brokerage for AED 1 million. The broker takes a 2% commission out of the sale, which is AED 20,000. The 5% VAT is charged on that amount, which is AED 1,000.

2. Maintenance and service charges

Expect to pay VAT on top of your annual maintenance fees and service charges. These include your community charges. If you're charged a separate chiller fee, then you'll need to pay VAT for it too. Anything in the realm of property management or any sort of maintenance charges will be subject to VAT. In the case that you're living in a serviced apartment, the service charges associated with the same will be charged.

3. Bank service charges

In the case that you are getting a mortgage, then expect to pay an additional 5% VAT to your bank service charges in addition to paying VAT on other services rendered.

4. Utility bills

All your utility bills, including your DEWA bill will now carry a 5% VAT. 

5. Short term rentals

In the case of rentals shorter than 6 months, you'll need to pay VAT. This applies to hotel apartments and AirBnb's too. You will be exempted if the duration of your lease exceeds 6 months or if you own an Emirates ID (which means you'll need to be a resident).

6. EJARI Registration and trustee office fees

In the case that you are renting, you need to register with EJARI. This elicits the 5% VAT on the registration fee. If you're purchasing a property, while registering at the trustee office, you will also need to pay 5% VAT.

Handy infographic

The following infographic summarises the costs. You can also download the infographic here to keep it handy.