VAT on UAE real estate: zero-rated, exempt and standard — and why the difference decides your input VAT

The map

• New residential, first supply within three years of completion — zero-rated: no VAT charged, full input-VAT recovery for the developer
• Residential thereafter — exempt: no VAT charged, and no input-VAT recovery on costs attributable to it
• Commercial property, sale or lease — standard-rated 5%
• Bare land — exempt; land with civil-engineering works or partially completed buildings is a facts question, not a label question
• Hotel apartments and serviced accommodation — standard-rated: the supply is closer to hospitality than housing

Why the treatment matters more than the rate

Zero-rated and exempt both mean the tenant or buyer pays no VAT — but they are opposites for the supplier. Zero-rating keeps the door to input-VAT recovery open; exemption closes it. A residential landlord's agency fees, maintenance and management costs carry 5% that is simply lost. A developer selling first supplies at 0% recovers construction VAT in full — which is why the three-year window and the completion date are worth documenting to the day.

Mixed portfolios and mixed buildings

A building with retail below and apartments above makes both taxable and exempt supplies, which drags the owner into input-VAT apportionment: directly attributable costs follow their supply, shared costs split by a fair method, and the recovery position needs an annual true-up. The same logic hits any landlord holding commercial and residential side by side — the portfolio's VAT is managed at the cost-allocation level, not the invoice level.

The traps

• Charging 5% on residential rent because the tenant is a company — the supply's nature, not the tenant's, decides
• Missing the first-supply window: completing in year one and first-supplying in year four turns 0% into exempt and strands the construction VAT
• Commercial buyers forgetting the special payment mechanics on commercial property sales — the VAT is paid to the FTA directly before transfer
• Treating a serviced-apartment operation as exempt residential when its substance is hospitality

How Orbit applies this

Orbit classifies property income streams per unit and treatment, attributes costs to taxable and exempt pools as invoices arrive, computes the recovery ratio with the annual adjustment, and keeps completion and first-supply dates on the asset record — the facts the treatment turns on.