Is VAT charged on buying an off-plan property?

Where a building was completed prior to 1 January 2018, but the first supply of that building within 3 years of its completion takes place after 1 January 2018 the supply will still qualify for zero-rating. It is important to note however, that this rule applies to the first supply of the property, and not to the first supply after the introduction of VAT. If the building was actually transferred or made available for use to the buyer or lessee prior to 1 January 2018, any subsequent supply after 1 January 2018 will not qualify as the first supply of the building even where the building was completed within the last 3 years. Any subsequent supplies of the building, either by sale or lease, within 3 years from its completion date shall not be zero-rated, as they will not qualify as the first supply of the building. Where a taxable person incurs the costs of constructing a residential building, all of the VAT incurred on the costs of such development shall be recoverable in full on the basis that the costs relate to the zero-rated first supply. Any future supplies of the building by that taxable person (e.g. a subsequent lease, which would be exempt from VAT after the first supply) does not impact the developer’s right to recover input tax incurred before the date of first supply. This means that the taxable person is not required to make any adjustments to its initial input tax recovery on the development costs under the capital assets scheme 6. 3.3. Subsequent supplies of residential buildings The supply of a residential building other than the first supply, is exempt from VAT. This includes where the subsequent supply of the property is supplied within 3 years from the buildings’ completion. Where the supplier of the residential building incurs VAT on costs relating to such a subsequent supply e.g. agent fees, or incurs VAT on costs relating to the general upkeep and maintenance of the property after the first supply, then such costs are considered to directly relate to the exempt supply of the building. As such, the supplier will be unable to recover any VAT on such costs via its VAT return. 3.4. VAT Liability of service charges relating to residential buildings A community master developer or building owner will often make charges to the owners or tenants of units within the community/building in return for the upkeep of the communal areas of the property. Such charges will be subject to VAT at the standard rate, on the basis that they represent a charge for the services of maintaining and running the communal areas. Such charges do not represent the consideration for a supply of a residential building and as such will not be eligible for zero-rating or exemption. 6 8 Article 52(4), VAT Executive Regulations. VAT Guide | Real Estate | VATGRE1