What is VAT on Property (Dubai)?
Residential resales in Dubai are exempt from VAT and the first supply of a new home within three years of completion is zero-rated, so buyers pay no VAT on the home itself. The 5% rate applies to commercial property and to services around the deal, including agent commission.
Description
UAE VAT runs at a standard 5%, but residential property is carved out. The first supply of a residential unit by a developer, made within three years of completion, is zero-rated: VAT applies at 0%, which lets the developer recover input VAT while charging the buyer none. Every subsequent sale or lease of residential property is exempt, so no VAT is charged on a resale apartment or on residential rent.
Commercial property sits on the other side of the line: sales and leases of offices, retail and other commercial premises carry 5% VAT. Bare land is exempt. Hotel apartments and serviced accommodation are treated as commercial-style supplies and attract the 5% rate.
The place buyers actually meet VAT is on services. Agent commission on a resale, 2% of the price, carries 5% VAT on the commission. Conveyancing, snagging inspections, bank valuations and the trustee office fee all attract 5% on the service charge. The property may be exempt; the deal around it is not.
How to interpret
When a fee is quoted 'plus VAT', add 5% of the fee, not of the property price. A 2% commission on an AED 1.2M resale is AED 24,000, and the VAT on it is AED 1,200, bringing the effective commission cost to 2.1% of price.
For residential investors VAT is a rounding item confined to fees. For commercial buyers it is a cash flow question: 5% on the purchase price is significant, and whether it is recoverable depends on VAT registration and the use of the asset, which is specialist advice territory.
Dubai market context
Off-plan residential purchases are the cleanest case: the developer's first supply is zero-rated, the developer pays the sales commission, and the buyer's payment schedule carries no VAT line at all.
Landlords of residential units do not charge VAT on rent and generally cannot register for VAT on the strength of exempt residential letting alone. Owners of commercial units leasing at 5% VAT typically must register once taxable supplies cross the mandatory threshold, and file accordingly with the Federal Tax Authority.
The three-year first-supply window matters for buyers of completed but unsold developer stock: a unit first sold within three years of completion is still a zero-rated first supply, while the same unit sold on by its first owner is an exempt resale. The buyer pays no VAT either way; the difference sits in the developer's input VAT recovery.
Frequently asked questions
No. A new home bought from the developer within three years of completion is zero-rated, and any resale residential purchase is exempt. VAT only appears on services around the deal, such as commission and trustee fees.
Yes. The standard resale commission of 2% carries 5% VAT on the commission amount, making the effective cost 2.1% of the purchase price. On off-plan the developer pays the commission, so the buyer pays neither the fee nor its VAT.
5% on both sales and leases of commercial property, per the UAE VAT framework. Registered businesses may recover it as input VAT depending on their circumstances.
Not on residential rent, which is exempt. Commercial rent carries 5% VAT, and hotel or serviced apartment stays are taxed as commercial-style accommodation.
Only VAT-registered businesses making taxable supplies can recover input VAT, which in property terms mainly means commercial assets. VAT incurred on fees around exempt residential purchases is generally not recoverable.
This content is for educational purposes only and does not constitute investment, financial, legal, or tax advice. Yields, returns, and market data referenced are historical or estimated and are not guaranteed. Capital is at risk. Seek independent professional advice before making investment decisions. Oliva is a licensed Dubai real estate advisor (DLD Broker Card: 92025, RERA BRN: 1573501). Read our Key Risks Disclosure and Disclaimer.