Alongside regional leaders, US Secretary of State Antony Blinken will attend the meetings
world3 hours ago
The rules governing buying and leasing of property in the UAE varies significantly, depending on where the property is located. There are seven autonomous emirates, including Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Fujairah, Umm al Quwain and Ajman, and each is governed by its local legal system. It is, however, expected that the VAT rules will apply uniformly across all the emirates.
According to the latest brief from the UAE's Ministry of Finance, supplies of commercial property (sales and leases) will be subject to the VAT standard rate of 5 per cent, whereas supplies of residential property (sales and leases) will be exempt from VAT, with the exception of the first sale of 'new' residential property, which will be subject to the zero rate of VAT.
The general rule is that for a property to come within the charge to VAT, it must have been completely developed and it must be supplied for consideration in the course of business. However, questions still abound.
Is the supply of a completed property only taxable while the property is considered 'new'? Up to how many years, from the date on which the property itself or a development of the property, is completed is it considered new? Once a property is no longer new, will the supply of that property be exempted from VAT? Can the person supplying such a property or the purchaser opt to have the supply subject to VAT?
Similarly, here are some things to consider: In the UAE, companies which are selling or renting out properties also provide property-related services, such as maintenance and repair work of the properties and communal facilities, security, further investment for the community improvement. These services can be charged either on incidental basis or regular basis as service charges. If the majority of the customers are businesses, especially the ones which are VAT-registered, the additional charge of 5 per cent may not have any effect. However, this additional 5 per cent may have an impact on private individuals for residential properties and non-VAT registered businesses for commercial properties.
As stated above, the residential properties will be zero-rated for their first supply and exempted for the subsequent supplies for both leases and sales. In either case, this means that there is no VAT due for the final consumers of the residential properties but the questions remain whether the treatment will extend to property-related services.
In the early stages of constructing the buildings, the developers should have a good cash flow management which takes into account the VAT amount received from the properties' buyers and the VAT amount which is paid to their suppliers, that can eventually be subtracted from VAT on sales or refunded from the tax authority. Usually, the amount involved can be quite large and a simpler cash flow management such as keeping a separate bank account to manage the VAT funds may be implemented as soon as the developers become VAT-registered business.
The writer is Crowe Horwath's VAT services team leader. Views expressed are his own and do not reflect the newspaper's policies.
Alongside regional leaders, US Secretary of State Antony Blinken will attend the meetings
world3 hours ago
Twice Grand Slam champion Alcaraz is set to make his Olympic debut while Nadal will be eyeing his third gold medal after wins in Beijing and Rio
sports3 hours ago
The quake was at a depth of 503.2 km
asia3 hours ago
The defending champions overpowered TP Mazembe from the Democratic Republic of Congo 3-0 in Cairo
sports4 hours ago
Although the Gunners are top as they chase a first title for 20 years, Manchester City are regarded as statistical favourites to win a fourth successive crown
sports4 hours ago
Doctors urge residents to take such situations seriously: 'Sharp objects can pierce the food pipe and can migrate into areas like the chest, causing further complications,' an expert says
uae4 hours ago
Highly-rated 19-year-old Turkish midfielder Arda Guler scores match-winner on his first La Liga start
sports4 hours ago
The special incentive allows eligible companies to obtain interest-free loans of a maximum of Dh300,000 with a grace period of 6 to 12 months
business4 hours ago