Is commercial rent subject to VAT?

Answered by TI from the Federal Tax Authority’s own law · 25 September 2026. Guidance, not tax advice: rely on the official text.

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Yes, renting out commercial property is subject to VAT at the standard rate of 5%.

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The detail

Under Article 43 of the Executive Regulations, the VAT exemption for real estate only applies to supplies of residential buildings (where the lease exceeds six months or the tenant holds an Emirates ID). Commercial property leases fall outside this exemption and are therefore standard-rated supplies subject to VAT at 5%.1

What the law says

Article 43 exempts the supply (including lease) of residential buildings from VAT, unless zero-rated, provided the lease exceeds six months or the tenant holds an Emirates ID.1

What it depends on

The exemption in Article 43 is specific to residential buildings; property that does not meet the residential building conditions is not exempt.1
Bare land is separately exempt under Article 44, but land covered by buildings or civil works (including most commercial premises) is not treated as bare land.2

Check before you rely on it

Confirm the property being rented is not a qualifying residential building under Article 43
Check whether the lease could instead fall under the bare land exemption if unbuilt

Sources (2) — read the official text

1VAT Executive RegulationArticle 43Executive Regulation

Article 43 – Exemption of Residential Buildings

Read the article
Article 43 – Exemption of Residential Buildings 1. The supply of residential buildings is exempt, unless it is zero-rated, 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. 2. The period of tenancy referred to in Clause 1 of this Article shall be identified with reference to the contractual period of tenancy and shall not take into account any Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 34 period arising from a right or option to extend the period of tenancy or renew the tenancy. 3. For the purposes of Clause 1 of this Article, a right of any party to terminate the lease early shall be ignored.

Official PDF, pp. 34–35Captured from the FTA website on 10 Sep 2026
2VAT Executive RegulationArticle 44Executive Regulation

Article 44 – Exemption of Bare Land

Read the article
Article 44 – Exemption of Bare Land The phrase “bare land” means land that is not covered by completed, partially completed buildings or civil engineering works.

Official PDF, p. 35Captured from the FTA website on 10 Sep 2026Found by following a reference in another source

Helpful?

Yes, renting out commercial property is subject to VAT at the standard rate of 5%.

What the law says:
- Article 43 exempts the supply (including lease) of residential buildings from VAT, unless zero-rated, provided the lease exceeds six months or the tenant holds an Emirates ID. [1]

What it depends on:
- The exemption in Article 43 is specific to residential buildings; property that does not meet the residential building conditions is not exempt. [1]
- Bare land is separately exempt under Article 44, but land covered by buildings or civil works (including most commercial premises) is not treated as bare land. [2]

Check before you rely on it:
- Confirm the property being rented is not a qualifying residential building under Article 43
- Check whether the lease could instead fall under the bare land exemption if unbuilt

Sources:
1. VAT Executive Regulation — Article 43
2. VAT Executive Regulation — Article 44

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

Is commercial rent subject to VAT?

The detail

What the law says

What it depends on

Check before you rely on it

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