Is the resale of a residential apartment subject to VAT?

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.

Purchaser - Acquisition of a non-residential building المشتري – االستحواذ على مبنى غير سكني والتوريد الالحق له and the subsequent supply thereof Non-residential building refers to any building not يقصييد بمصييطلح المبنى غير السييكني أي مبنى ال يسييتوفي falling within the definition of a ‘residential ، ومن ذلك على س ييييييبيل المثال،"تعريف "المبنى الس ييييييكني building’, for example hotel/serviced apartments. .مزودة بخدمات ّ الشقق الفندقية والشقق ال If the seller sold a non-residential building to a وقام األخير،إذا قام البائع ببيع مبنى غير سكني للمشتري purchaser who subsequently leases or sells the ف يكون هناك،بتيجير المبنى أو بيعه الحقا لطرف ثالث building to a third party, two separate supplies : وهما كما يلي،توريدان منفصالن في هذه الحالة occur; that is: • First supply - The seller supplies the building to يقوم البائع بتوريد المبنى إلى المشتري- التوريد األول the buyer on the date of supply as determined في تاريخ التوريد كما هو محدد بموجب القواعد العامة under the general time of supply rules. This و يخضع هذا التوريد لضريبة القيمة.لتاريخ التوريد supply is subject to 5% VAT if the seller is a إذا كان البائع خاضعا للضريبة؛٪5 المضافة بنسبة • Taxable Person; • Second supply - The purchaser amends the يقوم المشتري بتعديل االستخدام- التوريد الثاني permitted use of the building and leases or sells المصرّ ح به للمبنى وتيجيره أو بيعه كمكان إقامة رئيسي the building as a principal place of residence to يكون هذا التوريد." أي ك "مبنى سكني،لطرف ثالث a third party, i.e. as a ‘residential building’. This ) من2( م عفى من ضريبة القيمة المضافة بموجب البند supply is exempt from VAT under Article 46(2) ) من المرسوم بقانون؛ أو46( المادة • of the Decree-Law; or • The purchaser leases or sells the building as a قد يقوم المشتري بتيجير المبنى أو بيعه لطرف ثالث serviced/hotel apartment to a third party. This يخضع هذا.كشقة مزوّ دة بخدمات أو كشقة فندقية supply is subject to 5% VAT if the purchaser إذا كان٪5 التوريد لضريبة القيمة المضافة بنسبة (owner of the building) is a Taxable Person. Page 7 of 8 .المشتري (مالك المبنى) خاضعا للضريبة •

3. Residential buildings 3.1. Definition A residential building is a building which is intended and designed for human occupation. This includes3: • • • • 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; Residential accommodation for students or school pupils; Residential accommodation for armed forces and police; Orphanages, nursing homes and rest homes. A residential building is not4: • • • • Any place that is not a building fixed to the ground and which can be moved without being damaged; Any building that is used as a hotel, motel, bed & breakfast establishment, or hospital or the like; A serviced apartment for which services in addition to the supply of accommodation are provided; Any building constructed or converted without lawful authority. A building is still considered to be 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 the property, or if it includes any other features that may be said to comprise part of the residential building5. 3.2. First supply of a residential building The first supply of a residential building will be zero-rated for VAT purposes. This means that the VAT incurred on costs relating to the first supply of the building should be recoverable in full. The ‘first supply’ includes a supply of the building by either sale or lease, but it must be made within 3 years of the buildings’ completion date. This treatment shall apply regardless of who the building is supplied to (e.g. a registered customer, a nonregistered customer, a related party etc.) provided that it is supplied within the relevant timeframe. The completion date of a building is normally the date the building is certified as being complete by an appropriately qualified party. However, if the building is occupied before this date, the date on which the building is occupied shall be taken to be the date of completion. 3 Article 37(1), VAT Executive Regulations. Article 37(2), VAT Executive Regulations. 5 Article 37(3), VAT Executive Regulations. 4 7 VAT Guide | Real Estate | VATGRE1