Is VAT charged on real estate agent commission?

Article (19) Supply of Real Estate Related Services 1. Real Estate Related Services shall mean those that are closely linked to real estate, including: a) real estate experts and agent services; b) granting the right to possess or use real estate; c) services related to construction work; 2. As an exception to the provisions of Article 15 of this Agreement, the place of supply of Real Estate Related Services shall be where the real estate is located.

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.

VAT treatment of agency services Where an agent is charging an agency fee or commission for its agency services, these agency services should be treated as a separate supply of services from the supply of the underlying goods or services. Where the place of supply of such agency services is in the UAE, the services are considered a taxable supply. It should be noted that the place of supply for agency services provided by agents must be determined independently from the place of supply of the underlying goods and services, and therefore can differ from the place of supply of such goods or services. For example, where a UAE agent provides agency services to a UAE supplier of electronic services which have a place of supply in the USA under the use and enjoyment rules, the place of supply of the agency services would still be in the UAE. The default VAT rate for a taxable supply of agency services in the UAE is 5%. However, in certain situations, the services may be zero-rated where they are supplied to a non-resident principal.32 For zero-rating to apply, the following conditions must be met: • • • the agency services are supplied to a recipient who does not have a place of residence in the UAE or any Implementing State and who is outside the UAE at the time the services are performed; the agency services are not supplied directly in connection with any real estate or goods situated in the UAE at the time the services are performed; and the performance of the agency services is not received by another person in the UAE who is unable to recover any input tax in full.33 The application of this zero-rating provision must be determined by reference to the specific services provided by the agent. For example, while agency services relating to the provision of an electronic platform to allow a principal to sell goods or services in the UAE may be eligible to be zero-rated, a service of physically handling and delivering goods would not be eligible for zero-rating since they would be directly in connection with the goods in the UAE. It should be noted that where an agent does not charge a fee or commission for its services, VAT would not be applicable on the services. 5.3.2. Undisclosed agency In accordance with Article 9(2) of the Decree-Law, a supply of goods and services through an agent acting in its name, i.e. through an undisclosed agent, is considered to be a direct supply by the agent and for his benefit. Where an undisclosed agent is involved in a supply of any goods or services, there are two simultaneous supplies of these goods or services for VAT purposes – a supply 32 33 Article 31(1)(a) of the Executive Regulation. Article 31(3) of the Executive Regulation. 27