Standard-rated
Commercial property — 5%
The sale or lease of commercial property, such as offices, shops, and warehouses, is standard-rated at 5%. A registered seller or landlord charges VAT and can recover related input VAT.
Tax guide · UAE
VAT on real estate in the UAE
Property VAT is not one rate — it depends on whether the property is commercial or residential, new or resold, built or bare. Here is how each supply is treated, and why the zero-rated versus exempt line matters.
Why property VAT needs care
Real estate is one of the areas where UAE VAT treatment varies the most. The same word — "property" — can mean a standard-rated commercial lease, a zero-rated new home, an exempt resale, or exempt bare land. Each carries a different rate and, just as importantly, a different position on input VAT recovery.
That last point is where mistakes cost money. Zero-rated supplies are taxed at 0% but still let you recover related input VAT; exempt supplies carry no VAT and generally block recovery. Confusing the two on a development or a portfolio can distort your VAT 201 and your cash flow.
The four property treatments
Every real-estate supply in the UAE falls into one of these categories.
Zero-rated
First supply of new residential — 0%
The first supply of a new residential building within three years of its completion is zero-rated (0%). The supplier reports it and can generally still recover related input VAT.
Exempt
Subsequent residential — exempt
Supplies of residential property after that first supply are exempt. No VAT is charged, and input VAT attributable to those supplies is generally not recoverable.
Exempt
Bare land — exempt
The supply of bare land — land with no completed or partly completed buildings on it — is exempt from VAT, with no recovery of related input VAT.
Points that trip people up
Most property VAT errors come from the same handful of details. Keep these in view when you classify a supply.
Developers and landlords also frequently deal with Designated Zones — see how those rules interact in our Designated Zones and VAT guide, or step back to the complete UAE VAT guide.
- Zero-rated and exempt are not the same: zero-rated (0%) still allows input VAT recovery; exempt does not.
- The three-year zero-rating window runs from the completion of the new residential building.
- Commercial-property VAT at 5% is recoverable input VAT for a registered buyer using it for taxable activity.
- Land counts as bare only if it has no completed or partly completed buildings — otherwise the treatment can differ.
- Mixed-use developments may need each part classified separately, which affects how input VAT is recovered.
How AIMuhaseb helps
Property VAT, classified correctly
AIMuhaseb lets you tag each property supply — commercial, new residential, resale, or bare land — so the right treatment flows through to your VAT 201 and your input VAT recovery is calculated correctly. For developers and property groups, our specialists can review the classification behind each project.
FAQ
Real-estate VAT questions, answered
Is VAT charged on property in the UAE?
It depends on the type of property and the supply. Commercial property is standard-rated at 5%. The first supply of a new residential building within three years of completion is zero-rated at 0%. Later supplies of residential property are exempt, and bare land is exempt. Classifying the property and the supply correctly is what determines the treatment.
What is the VAT rate on commercial property in the UAE?
The sale or lease of commercial property — offices, retail units, warehouses, and similar — is standard-rated at 5%. A VAT-registered seller or landlord charges 5% and can generally recover the input VAT on related costs. A registered buyer using the property for taxable activity can usually recover that VAT as input tax.
Is residential property zero-rated or exempt?
Both, depending on timing. The first supply of a new residential building within three years of its completion is zero-rated at 0%, which lets the developer recover related input VAT. Any supply of residential property after that first supply is exempt — no VAT is charged and related input VAT is generally not recoverable. The distinction is important because it changes recovery, not just the rate.
Is bare land subject to VAT in the UAE?
No. The supply of bare land is exempt from VAT. Land is treated as bare when it has no completed or partly completed buildings on it. Because it is exempt rather than zero-rated, input VAT attributable to the supply of bare land generally cannot be recovered. Where land already has buildings, a different treatment may apply.
What does "first supply of new residential" mean?
It refers to the initial sale or lease of a newly built residential property, made within three years of the building being completed. That first supply is zero-rated, so a developer selling new homes reports the supply at 0% and can recover related input VAT. Once that first supply has been made, subsequent supplies of the same property are exempt.
Can a developer recover VAT on building costs?
For residential development, because the first supply of the new building is zero-rated rather than exempt, the developer can generally recover the input VAT incurred on construction and related costs. This is a key practical reason the zero-rated versus exempt distinction matters — exempt supplies would block that recovery.
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Get property VAT right
Developing, leasing, or trading property? Tell us about your portfolio and a UAE specialist will help you apply the correct VAT treatment.