Dubai is one of the gold cities around the world. And lately, it has been proved literally. Tourism, business, real estate, and anything you can think of are in full bloom in Dubai.
Taking real estate, in particular, has gone through the best changes in past years. Starting from more accessible investment policies to a rising profit of properties. But that is not the end of the real estate industry in Dubai.
The real estate industry includes a hefty process. There are a lot of things to take care of. Sale, purchase, tax, commission etc., are the fundamental four pillars of the real estate industry.
VAT is another fascinating factor in the Dubai real estate industry. There are differences in policies and processes of the real estate industry depending upon a country’s rule of law. Today we are going to talk all about real estate VAT in Dubai. Also, you can check out apartments for sale in Jumeirah Village Triangle.
What Is VAT?
Firstly we will get the first barrier out of our path. What is VAT? VAT’s complete form is – Value Added Tax. The VAT is applied on properties that are undergoing the process of supply. The consumers are charged with VAT at each stage of the supply process.
Who Has To Pay?
The next thing that we need to understand is who needs to pay VAT. So there is a list that includes the property and business owners that are bound to pay VAT. The list is made after the valuation of properties. Here are the properties and businesses that have to pay VAT –
– Commercial buildings and properties have to pay the VAT tax.
– Buyers of property pay the VAT to the seller.
– Sellers of a property are supposed to pay VAT tax to the government.
– One has to pay when there is a supply of property.
– The VAT also needs to be paid at every transaction of money, be it selling or buying, of a commercial property.
The next question is how much or what percentage needs to be paid as VAT. As evident by the name, 5% of the total transaction of money is supposed to be paid as VAT. The 5% is set as the standard amount. There is a whole process through which VAT is calculated.
Not all properties and businesses are required to pay VAT. Some properties are exempted from paying VAT tax. Such businesses and properties are –
– Resident buildings are exempt from VAT.
-Personal use properties need not pay VAT.
– Resident buildings are exempt from VAT until the 3 years of the supply. After 3 years end, they will have to pay a certain amount of tax.
These properties are exempt from VAT, but they still have to pay 3% of the property tax.
What Does Supply Mean In Real Estate?
You must be confused about what supply means in the real estate industry. To simplify the meaning for you, here are some descriptions
– Supply in the real estate industry refers to the sale, lease or giving the rights of a property from owner to a buyer.
– To escape from paying the VAT, people give out their property on rent just for the paperwork. They register their property as a residential building and thus escape from paying the VAT.
Purpose Of VAT
Like any other tax, VAT is also raised to fill up the government treasure. VAT works similarly to other revenues. VAT also helps in lowering the income tax rate. VAT results in quite a hefty amount of money both to the government and buyers of a commercial property.
Through this information, we tried to answer basic questions concerning real estate VAT in Dubai. Dubai is all about skyscrapers and Porsche things. There is no stop to being more creative and extraordinary about real estate or something else.