Dubai gives a home to many businesses and is the embodiment of modern technology. It utilizes advanced and smart technology to give the best quality life experience. It is also a substantial investment hub for multinational companies and other businesses around the world. Dubai is known for its big real estate market globally. Its yield rate is between 6-9%, which is typically 2-3% more than other countries in the real estate market. Real estate is a huge sector with investors, buyers, tenants, and owners in Dubai to manage massive tourism every year.
Dubai’s status as the fourth most visited city in the world. World-class infrastructure which leaves you in the awe-inspiring state. Their regulations to serve the needs of investors and renters are also commendable. Let us talk about Dubai’s VAT (value-added tax) which is a tax that is indirect to the consumption of goods (most of them) and services.
Dubai’s real estate market is increasing with the population each year. Investors keep in mind this fact and buy property to supply the rent demand with an ever-growing demographic. Its advantages are properties purchased and sold regularly for hotels and other real estate businesses. Only 5% of VAT transpired in the new tax law, which is still very low in regards to other countries. It was put in place to encourage the condition of the United Arab Emirates interest flow. It is expected to only have a limited effect on real estate businesses.
Reasons On How New VAT Affects Dubai Real Estate
The VAT in Dubai only affects businesses which are VAT registered or required. They obliged to record, assess and report its VAT accountability. Here are some reasons how the newly introduced VAT changes Dubai real estate.
VAT on Residential Property
According to the new VAT law in Dubai since 1st January 2018, real estate properties for renting and purchasing are considered a “taxable supply”. So any real estate from developers before the completion of three years the VAT value would be zero. Same goes to renting or purchasing residential property, VAT will be zero for the first time. Before buying or selling have a VAT consultant for advice in the property department. Owners of residential properties and other businesses are also accountable for VAT.
VAT on Commercial property
Residential properties for leasing do not include VAT but commercial leases will. Owners of commercial properties will get encouraged and increased tax for rentals. Commercial properties under this law are subjected to 5% of the VAT value. If tenants and landlords are both registered under VAT, the cost is excluded. If tenants and landlords are not under VAT, then the amount will be included in the lease. Non–resident of Dubai can not implement reverse charges even if they registered under VAT.
VAT on Construction
The new VAT will affect construction projects. All the supplies and materials for construction are taxable. Developing a structure will be more productive with the new VAT. It might be helpful to have VAT assistance when re-evaluating the construction budget and process. In the oncoming Expo 2020, almost all developers have launched their developments.
VAT On Brokers
Real estate agents can charge VAT tax on residential and commercial properties. An agent can charge them for their services. Real estate agent charges them with the commission, lease, and, rent.
However, there might be a lot of disruption going in the Dubai real estate market with the new tax law. It is a value-added economic country which can stand on its own in no time. Dubai’s real estate, as mentioned, is one of the biggest markets in the world for a reason.