Is hotel accommodation subject to VAT?

Article 21 – Place of Supply of Services Related to Real Estate 1. For the purposes of the Decree-Law and this Decision, “real estate” includes as an example: a. Any area of land over which rights or interests or services can be created. b. Any building, structure or engineering work permanently attached to the land. c. Any fixture or equipment which makes up a permanent part of the land or is permanently attached to the building, structure or engineering work. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 16 2. A supply of Services is deemed to relate to a real estate where the supply of Services is directly connected with the real estate, or where it is the grant of a right to use the real estate. 3. A supply of Services directly connected with real estate includes: a. The grant, assignment or surrender of any interest in or right over real estate. b. The grant, assignment or surrender of a personal right to be granted any interest in or right over real estate. c. The grant, assignment or surrender of a licence to occupy land or any other contractual right exercisable over or in relation to real estate, including the provision, lease and rental of sleeping accommodation in a hotel or similar establishment. d. A supply of Services by real estate experts or estate agents. e. A supply of Services involving the preparation, coordination and performance of construction, destruction, maintenance, conversion and similar work.

Article 37 – Residential buildings 23 1. The phrase “residential building” means a building intended and designed for human occupation, including: a. Any building or part of a building that the person occupies, or that it can be foreseen that a person will occupy, as their principal place of residence. b. Residential accommodation for students or school pupils. c. Residential accommodation for armed forces and police. d. Orphanages, nursing homes, and rest homes. 2. A “Residential building” does not include any of the following: a. Any place that is not a building fixed to the ground and can be moved without being damaged. 23 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 29 b. Any building that is used as a hotel, motel, bed and breakfast establishment, or hospital or the like. c. A hotel apartment or serviced apartment or the like. d. Any building constructed or converted without lawful authority. 3. A building shall be considered as a residential building if a small proportion of it is used as an office or workspace by the occupants, if it includes garages and gardens used in conjunction with it, or it includes any other features that may be considered to comprise part of the residential building.

to be used by that business – and therefore such supply of real estate is eligible to be treated as outside the scope of UAE VAT. All other supplies of real estate are deemed to be supplies of services related to real estate. This includes, but is not limited to licences to occupy, and other contractual rights which are exercisable over or in relation to real estate12. The supply of services also includes the provision, lease and rental of sleeping accommodation in a hotel or similar establishment, services of real estate experts or estate agents13, and construction and similar services14. As a result, supplies of services related to real estate which are outlined above and performed in the Designated Zone will be liable to VAT at the standard rate. 12 Article 21(1)-(3), VAT Executive Regulations 13 Article 21(3)(d), VAT Executive Regulations 14 Article 21(3)(e), VAT Executive Regulations 29 VAT Guide | Real Estate | VATGRE1

5.4. Multiple supplies versus a simple composite supply In some situations, a supplier may make a supply of a number of goods and services as part of the same transaction. Where there is such a supply of different goods and/or services, the supplier has to determine whether they are making a single composite supply of those goods and/or services, or multiple supplies of goods and/or services. 5.4.1. Multiple supplies Where a person makes multiple supplies, the person must determine the correct VAT treatment of each of the supplies that it makes. This means that potentially different supplies made as part of the same transaction can be subject to different VAT treatments. In such circumstances, where a single consideration was paid for multiple supplies that are subject to different VAT rates, the supplier must determine the value of each supply and apply the correct VAT treatment to that value. Example 8 A tourist visitor from the UK is booking a hotel room in Dubai using the hotel’s website for AED 1,000. While booking the room, the person added an optional extra of being picked up by the hotel from the airport. This optional airport pickup costs an additional AED 150. The hotel accommodation and the transportation service are two different supplies for VAT purposes. These services are clearly independent of each other and both are subject to separate charges. As a consequence, the hotel charges VAT on the hotel room at 5% and treats the airport pick-up service as an exempt local transportation service. 5.4.2. A single composite supply A single composite supply is a single indivisible supply of a mixture of goods and/or services. By being treated as a single supply, all of the goods and/or services which form part of the supply will be subject to the same VAT treatment. A single composite supply may exist, for example, where there is a principal component and incidental components in a supply for which a single price is payable. Example 9 An airline provides free access to a lounge for all business class passengers on international flights. 21 VAT Guide | Taxable Person | VATG001