Real estate is a very important sector in the UAE. The supply of real estate is the supply of commodities. In addition, it also provides various services related to real estate, such as interior decoration services, construction services, hotel accommodation services, etc. Let us know where the real estate and related services are supplied in the UAE.
UAE real estate supply locations
The supply of real estate including sales and lease contracts is the supply of commodities. Since the supply of real estate does not involve the movement of real estate, the place of supply will be the place where the real estate is located. Therefore, the place of supply of real estate will be the UAE, and UAE VAT will apply to this supply.
For example: Noor Builders, based on VAT registration, constructs a residential building on Khadmat Street in Dubai. One year after the building was completed, it sold the building to the consumer Mr. Abdul.
Here, the supply location of residential buildings will be the UAE, and UAE VAT will apply to this supply. Since this is the residential construction supply within three years after the construction is completed, the supply will be zero rated supply.
To learn more about VAT on the supply of residential buildings, please refer to our article “VAT on the supply of residential buildings”.
Supply locations of real estate related services in the UAE
If the provision of services is considered to be related to real estate, the place where the service is provided is the location of the real estate. Therefore, any services related to real estate located in the UAE will also be deemed to be provided by the UAE, and UAE VAT will apply to that supply.
The provision of services is directly related to real estate, or real estate that grants the right to use the real estate.
The provision of services directly related to real estate includes:
1. Grant, transfer or surrender any rights or rights in real estate
2. Grant, transfer or give up personal rights to obtain any rights or ownership in real estate
3. Grant, transfer or surrender land use rights or other contractual rights related to real estate, including the provision, lease and lease of bedrooms in hotels or similar places
4. Provided by real estate experts or real estate agents
5. Provision of services involving construction preparation, coordination and execution, destruction, maintenance, modification and similar work.
For example: Leo Property Brokers LLC, registered under VAT in the UAE, provides real estate brokerage services for Rohan Solutions LLC in the UAE. Here, the supply place is the UAE, and the brokerage commission will be subject to value-added tax at the standard rate of 5%.
Services that are not considered directly related to real estate will be subject to the default supply location rules, that is, the supply location will be the supplier’s residence. To learn about the default rules for determining the location of service provision, please refer to our article “Location of Service Provision”.
Some examples of services that are not considered directly related to real estate include:
1. Arrange employees to construction sites, that is, temporarily assign employees from one organization to another organization
Advice or information about land or property market
Develop plans for buildings not related to a specific location
Property investment portfolio management
Provide storage of goods in the property without the right to use the customer’s specific area
Advertising services, including advertising services involving the use of billboards
General legal advice on real estate related contracts
For example: Ali Advocates, registered in Abu Dhabi, provided legal advice to Ahmed Solutions LLC of a company (residence in Dubai) on the lease of its office in Saudi Arabia.
Here, the place of provision of legal services will be the residence of the supplier, namely the UAE, because it is not a service directly related to real estate. Therefore, it will be taxed at the standard VAT rate of 5%.
Therefore, the supply location of real property and services directly related to real property will become the place where real property is located. On the other hand, the place of provision of services not directly related to real estate will be the supplier’s residence.