UAE tax burden might not go to the end-users

The UAE construction industry is unlikely to see slowdown next year after the imposition of VAT with some developers likely to absorb some portion of VAT cost, according to industry executives and analysts.

Set to be implemented at 5% in the UAE, the Federal Tax Authority (FTA) earlier said that the first supply of residential property will be zero rated - meaning that input costs can be reclaimed - for the first three years following its construction. After this time, it will be exempt from VAT, but owners will no longer be able to reclaim input costs. If a residential unit is sold even within the first three years, any subsequent sales or rentals will be exempt, but will no longer be zero-rated.

FTA said that all commercial buildings - including hotels, shops and offices - are subject to VAT at the standard rate of 5%, but that owners will generally be able to recover VAT on expenses related to the supply of the building. Continue Reading