By Parag Deulgaonkar
Domestic VAT law before the end of the first half, says MoF officials
Residential property sales and leases will be exempt from value added tax (VAT) in the UAE, but not commercial properties, according to tax consultants who attended a VAT briefing by the Ministry of Finance (MoF).
The briefing for advisors took place last week, ahead of a nationwide awareness campaign with the MoF which will educate various stakeholders on the collection of VAT.
The UAE is set to implement 5 percent VAT from January 1, 2018.
“Commercial property (sales and leases) will be subject to the standard rate of VAT, but residential property (sales and leases) will be exempt from VAT, with the exception of the first sale of new residential property,” David Stevens, VAT Implementation Leader, EY, told Arabian Business.
“Bare land will also be exempt from VAT,” he added.
Exemption of property sales and rental income will boost the real estate market, particularly in Dubai, which last year reported total real estate transactions worth $70.5 billion (AED259 billion), which included 41,776 sales deals and 15,000 mortgage transactions.
In the briefing, MoF officials also confirmed the UAE and some unnamed other Gulf Cooperation Council (GCC) member states were still on track to implement VAT from January 1 2018, with the UAE likely to release its domestic VAT law before the end of the first half of 2017, and detailed executive regulations to follow shortly after.
Under the GCC VAT framework agreement, member states who do not commence on January 1, 2018, will have up to one year to introduce VAT, the ministry official said.
According to Stevens, the message conveyed by the MoF was very clear that businesses need to prepare for VAT and businesses should initiate a VAT impact assessment immediately in order to determine the impact that VAT will have across their operations.
When asked if UAE companies are well placed to implement VAT, Stevens said that UAE companies have generally been ahead of those in other GCC countries, but many are still many slow to put procedures in place, including some very significant ones.
“Time and resources are increasingly becoming very scarce and immediate action is required to come to terms with the implications of VAT,” he added.
I must appreciate govt move to exempt vat for buying and renting.
it will keep great trust to investment.
I salute to government for correct positive thinking.