Buying a completed apartment or villa in the UAE from another owner carries no VAT at all. Buying a shop, an office or a warehouse carries 5%, and the buyer normally has to pay that 5% to the Federal Tax Authority directly before the land department will register the transfer. Those two sentences cover most residential and commercial transactions, but the rules underneath them turn on a handful of definitions in Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulation that decide whether a given building is residential at all.

This guide sets out the four VAT treatments UAE real estate can attract, the three-year window that makes a brand new home zero-rated rather than exempt, the six-month lease rule that can put 5% on a residential tenancy, how the payment mechanism works for commercial sales, and when a landlord has to register for VAT. Every rule below is cited to the decree-law, to Cabinet Decision No. 52 of 2017 as amended, or to the Authority’s own payment guide.

The Four VAT Treatments of UAE Real Estate

UAE real estate falls into one of four VAT categories: standard-rated at 5%, zero-rated at 0%, exempt, or outside the scope of VAT entirely. Zero-rated and exempt both mean no VAT is charged to the buyer or tenant, but they are not the same thing, because only a zero-rated supply lets the seller recover the VAT it paid on its own costs.

That distinction is the reason developers care intensely about the three-year window described below, and the reason a residential landlord cannot reclaim the VAT on a refurbishment. The table sets out where each type of property lands.

Property or transaction VAT treatment Legal basis
First supply of a residential building within 3 years of completion, by sale or lease Zero-rated (0%) Art. 45(9) Decree-Law
Every later sale or lease of that residential building Exempt Art. 46(2) Decree-Law
First supply of a building converted from non-residential to residential Zero-rated (0%) Art. 45(11) Decree-Law, Art. 39 Executive Regulation
Bare land Exempt Art. 46(3) Decree-Law, Art. 44 Executive Regulation
Commercial property: sale or lease of offices, retail, warehouses, covered land Standard-rated (5%) Art. 3 Decree-Law, by exclusion from Arts. 45 and 46
Hotels, motels, serviced apartments with additional services Standard-rated (5%) Art. 37(2) Executive Regulation
Land department registration fees charged in a sovereign capacity Outside the scope Art. 10 Decree-Law

Residential Property Is Exempt, Except for the First Three Years

Article 45(9) of the decree-law zero-rates “the first supply of residential buildings within (3) three years of its completion, either through sale or lease in whole or in part.” Article 46(2) then exempts every supply of a residential building after that. In both cases the buyer or tenant pays no VAT.

The practical effect for an individual buyer is simple. If you buy a brand new apartment directly from the developer, the invoice is zero-rated. If you buy the same apartment from its second owner five years later, the supply is exempt. Either way the 5% does not appear in your costs, which is why the upfront costs of buying property in Dubai are dominated by the land department transfer fee rather than by tax.

The difference matters to the seller. A developer making a zero-rated first supply is making a taxable supply at 0%, so it can recover the input VAT on construction, consultants and marketing. A landlord or owner making an exempt supply cannot recover input VAT on anything attributable to it. That asymmetry is the single most expensive VAT feature of UAE residential property, and it sits entirely on the supply side.

What counts as a residential building

Article 37 of the Executive Regulation defines a residential building as one “intended and designed for human occupation,” and expressly includes student and school accommodation, accommodation for armed forces and police, and orphanages, nursing homes and rest homes. A small office or workspace used by the occupants, garages and gardens do not break the definition.

The exclusions are narrower than most buyers assume. Article 37(2) removes from the definition anything not fixed to the ground and movable without damage, any building used as a hotel, motel, bed and breakfast or hospital, “a serviced apartment for which services in addition to the supply of accommodation are provided,” and, notably, “any building constructed or converted without lawful authority.” An unlicensed conversion is therefore not a residential building for VAT purposes at all, whatever it looks like.

The Six-Month Rule Behind Residential Exemption

Article 43(1) of the Executive Regulation exempts a residential supply only “where the lease is more than 6 six months or the tenant of the property is a holder of an ID card issued by Federal Authority for Identity and Citizenship.” A short residential letting to someone without an Emirates ID does not meet either limb, and falls outside the exemption.

This is the least-quoted rule in UAE property VAT and the one most likely to catch an owner who lets a flat to visitors on short contracts. Article 43(2) adds that the period is measured by the contractual term and “shall not take into account any period arising from a right or option to extend the period of tenancy or renew the tenancy,” so a three-month contract with an option to extend to a year is still a three-month contract. Article 43(3) says a right to terminate early is ignored, which cuts the other way and protects a genuine twelve-month lease with a break clause.

For a standard annual tenancy registered through Ejari in Dubai or Tawtheeq in Abu Dhabi, neither test is a problem: the lease is more than six months. The rule bites on the short end of the market, and it is the technical reason the holiday-home segment is treated as a taxable business rather than as residential letting.

Commercial Property: 5%, and the Buyer Usually Pays the FTA Directly

A sale of commercial property is standard-rated at 5%. The Authority’s own guide states plainly: “You must complete your VAT payment before you start with the ownership transfer process with the Land Department.”

The mechanism is unusual and surprises buyers who expect to hand the tax to the seller with the price. The VAT Payment User Guide for Commercial Property Buyers routes the payment through the Authority’s own portal as a miscellaneous payment, under a “Commercial Property Sale” option, before registration.

What actually happens at the counter

You create an e-Services account with the Authority, open the My Payments tab, and select Commercial Property Sale from the miscellaneous payment list. The form asks for the land department, the date of the transaction, the land department transaction number, the property sale amount, the VAT amount, whether the buyer or the seller is paying, and whether the paying entity is a legal or natural person. The commercial property number is optional and comes from the seller or the land department. Payment then goes through the e-Dirham gateway, and the guide instructs you to keep the seller’s invoice showing the VAT amount and the seller’s TRN.

Three transactions are expressly outside this mechanism. The guide states it does not apply to any sale or lease of residential property, to leases of commercial property, or to “the sale of a commercial property with the benefit of sitting tenants to a buyer who is a Taxable Person which qualifies as the transfer of a business.” That last exclusion is the transfer-of-going-concern route, and it is the reason an investor buying a tenanted office block may see no VAT payment at all while a buyer of the identical vacant unit pays 5%.

A commercial lease is different again. It is standard-rated, but it runs through the landlord’s normal VAT return rather than through a pre-registration payment, so the tenant simply receives a tax invoice with 5% added to the rent.

Bare Land Is Exempt, Covered Land Is Not

Article 44 of the Executive Regulation defines bare land as “land that is not covered by completed, partially completed buildings or civil engineering works.” Anything on the plot that qualifies as a partially completed building or civil engineering work takes it out of the exemption and into the standard 5%.

The definition is deliberately mechanical, and it is a live risk in plot transactions. Foundations, a partly built structure or installed infrastructure can be enough to make the plot “covered,” which flips a supply the parties expected to be exempt into a taxable one at 5% of the price. Anyone buying a development plot should establish the physical state of the site on the date of supply, not on the date of the agreement, and price the risk accordingly.

Holiday Homes and Serviced Apartments Are Taxable

A licensed holiday home is not a residential letting for VAT. Article 37(2)(b) and (c) of the Executive Regulation exclude hotels, motels and bed and breakfast establishments, and any “serviced apartment for which services in addition to the supply of accommodation are provided,” from the definition of a residential building.

The consequence is that income from short-stay letting is a standard-rated taxable supply, counts toward the VAT registration thresholds, and carries 5% on the guest invoice. Owners going down this route should read it alongside the licensing side, because a Dubai holiday home permit from the tourism department is what converts a home into that category in the first place, and the same permit is what makes the activity a licensed business for other tax purposes too.

VAT on the Costs Around the Deal

The property itself may carry no VAT while almost every service attached to it does. Agency, brokerage, conveyancing, valuation, property management and owners association services are taxable supplies of services at 5%, regardless of whether the underlying property is residential.

This is why a buyer of an exempt resale apartment still sees VAT lines on the closing statement. The 5% sits on the real estate agent’s commission in Dubai, on the trustee office service fee, and on the valuation fee where a mortgage is involved, but not on the price of the property.

Government charges are treated differently. Article 10 of the decree-law provides that a government entity is only regarded as making a supply in the course of business where its activities are conducted “in a non-sovereign Capacity” or “are in competition with the private sector,” with a Cabinet Decision determining which activities count as sovereign. Registration fees levied by a land department in that capacity are therefore not a taxable supply, which is why the transfer fee in the DLD fee schedule for property transfers appears without VAT added while the private services alongside it do not. Check the individual invoice rather than assuming, because the classification depends on the specific activity.

When a Landlord Has to Register for VAT

Registration is mandatory once taxable supplies exceed AED 375,000 in the previous twelve months, or are expected to exceed it in the next thirty days. Voluntary registration opens at AED 187,500 of taxable supplies or taxable expenses. Exempt residential rent does not count toward either figure.

Articles 46 and 48 of the Executive Regulation fix the thresholds at AED 375,000 and AED 187,500 respectively, and Article 19 of the decree-law defines what goes into the calculation. Because a long residential lease is an exempt supply rather than a taxable one, a landlord with several apartments let on annual contracts can collect well over AED 375,000 of rent and have no registration obligation at all.

The position reverses the moment the portfolio includes commercial units or licensed short-stay letting. Those are taxable supplies, they count toward the threshold, and once past it the landlord must register within 30 days of becoming liable and charge 5% on the taxable part of the portfolio. Article 20 adds a useful carve-out: the supply of capital assets belonging to the person is left out of the threshold calculation, so a one-off disposal does not by itself drag an owner into registration. The mechanics of the application itself are covered in our guide to the UAE VAT registration threshold and FTA process.

Recovering input VAT

A VAT-registered owner can recover input VAT attributable to taxable supplies, including zero-rated ones. It cannot recover input VAT attributable to exempt supplies. A mixed portfolio therefore has to apportion, and the residential side of it will generally be a cost rather than a recoverable amount. This is separate from income tax questions: whether the rent itself is taxable profit is a corporate tax question, not a VAT one, and is addressed in our guide to corporate tax on rental income in the UAE.

Frequently Asked Questions

Do I pay VAT when I buy an apartment in Dubai?

No. If it is the developer’s first supply within three years of completion, the sale is zero-rated under Article 45(9). If it is any later sale, it is exempt under Article 46(2). Either way no VAT is added to the purchase price. The agency commission, trustee fee and valuation fee attached to the deal do carry 5%.

Is there VAT on rent in the UAE?

Not on residential rent, provided the lease is more than six months or the tenant holds an Emirates ID, per Article 43(1) of the Executive Regulation. Commercial rent is standard-rated at 5%, and short residential lettings that meet neither limb of Article 43(1) fall outside the exemption.

Who pays the VAT on a commercial property sale?

VAT is the seller’s liability as the supplier, but the Authority’s payment guide is built around the buyer or the seller settling it through the FTA e-Services portal as a miscellaneous payment before the land department transfer, and the form itself asks you to select whether the buyer or the seller is paying. Agree the point in writing in the sale contract, because the registration step will not proceed without the payment.

Is VAT charged on the DLD 4% transfer fee?

No. Under Article 10 of the decree-law, a government entity only makes a supply in the course of business where it acts in a non-sovereign capacity or in competition with the private sector, so a registration fee charged in a sovereign capacity is not a taxable supply. The private services around the same transaction are taxable.

What is the difference between zero-rated and exempt for property?

Neither adds VAT to the buyer’s or tenant’s invoice. The difference is on the supply side: a zero-rated supply is a taxable supply at 0%, so the supplier can recover related input VAT, while an exempt supply carries no recovery right at all. That is why developers value the three-year first-supply window.

Is land subject to VAT in the UAE?

Bare land is exempt. Article 44 of the Executive Regulation defines bare land as land not covered by completed or partially completed buildings or civil engineering works, so a plot carrying foundations, a partial structure or installed infrastructure is not bare land and its sale is standard-rated at 5%.

Do I have to register for VAT if I rent out apartments?

Not on residential rent alone. Exempt residential leases do not count toward the AED 375,000 mandatory threshold or the AED 187,500 voluntary threshold. Commercial rent and licensed short-stay letting are taxable supplies and do count, and registration must be applied for within 30 days of becoming liable.

Is a serviced apartment treated as residential?

No, where additional services are provided alongside the accommodation. Article 37(2)(c) of the Executive Regulation excludes such units from the definition of a residential building, which makes the supply standard-rated at 5% rather than exempt.

What happens if a building was converted without permission?

Article 37(2)(d) excludes “any building constructed or converted without lawful authority” from the definition of a residential building. An unlicensed conversion therefore cannot benefit from the residential exemption or the zero rate, independently of any planning or municipality consequences.

Can VAT be avoided by selling a tenanted commercial building?

The Authority’s guide excludes from the pre-registration payment mechanism “the sale of a commercial property with the benefit of sitting tenants to a buyer who is a Taxable Person which qualifies as the transfer of a business.” That is a transfer of a going concern, which is not a supply of goods or services for VAT purposes. It is a technical test that depends on the facts, not a planning option to apply casually, and it should be confirmed with a tax adviser before the contract is signed.

Official Sources

Information is current as of August 2026. The rates, article numbers and definitions above were read from the English text of Federal Decree-Law No. 8 of 2017 as published by the Federal Tax Authority, and from the Authority’s consolidated English text of Cabinet Decision No. 52 of 2017 and its amendments, which itself carries the Authority’s note that it is an unofficial translation and that the Arabic prevails. Two limitations are worth stating. Cabinet Decision No. 100 of 2024 amended a large number of articles of the Executive Regulation with effect from 15 November 2024, including a clarification that a disposal of real estate resulting in a transfer of ownership is a supply of goods; the residential, bare land and registration-threshold articles relied on here were not among the provisions reported as amended, but readers relying on an exact wording should check the latest consolidated text. And the Authority’s commercial property payment guide carries a May 2021 date, so confirm the current screen flow on the FTA portal before relying on the field-by-field description. This is general information, not tax advice. Confirm your own position with the Federal Tax Authority or a registered tax agent before completing a transaction.