Is VAT charged on the sale of commercial property?

• • • • Sales or leases of residential property; Leases of commercial property Sales of commercial property by the developer of that property; and The sale of commercial property with the benefit of existing tenants to a buyer who is a taxable person which qualifies as the transfer of a business. In such cases, the seller of the property will issue a tax invoice to the buyer in relation to the sale proceeds of the property as normal. However, before completing the ownership transfer process with the Land Department, the buyer of the commercial property will be required to pay the VAT due on the purchase directly to the FTA. Alternatively, subject to availability in the specific Emirate, the VAT may be paid via a bank nominated by the FTA for such purposes. Once the payment of the VAT has been made to the FTA, the buyer will receive a Payment Transaction Number or, in the case of a bank payment, the buyer will need to retain proof of payment containing the details of the VAT payment. The buyer will be required to produce the Payment Transaction Number or proof of payment (if applicable) to the Land Department in order to process the ownership transfer. Without this evidence that the VAT on the purchase has been paid, the purchase of the property cannot proceed and this will lead to delays. The supplier will declare the output tax due on the property within its VAT return in the normal way, and will then also include the value of the output tax in the adjustments column of the return. This will avoid paying the output tax to the FTA twice. In all other cases, the normal VAT rules regarding VAT accounting and payment are applicable. 18 VAT Guide | Real Estate | VATGRE1

If you are registered for VAT with the FTA, then you must report the VAT amount on any commercial property sales as part of your VAT returns. Federal Tax Authority Payment for VAT on Commercial Property Sales – Buyer Taxpayer User Manual Page 12

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.