Insights · AXD Real Estate Dubai
Dubai VAT — Residential vs. Commercial
Is 5% VAT charged on the purchase of a Dubai residential property?
No — residential properties are VAT-free. Under UAE Federal Decree-Law 8/2017, the first sale of a new residential property within three years of completion is zero-rated (0% VAT); subsequent sales are exempt. Buyers pay no value-added tax on the apartment price.
However, 5% VAT applies to commercial properties as well as to all transaction services: broker commission, lawyer, conveyancer, property management, furniture.
Overview of VAT treatment
| Transaction | VAT treatment | Legal basis |
|---|---|---|
| Residential property — first sale (≤ 3 years after construction) | 0% VAT (zero-rated) | Art. 45 FDL 8/2017 |
| Residential property — subsequent sale / secondary | VAT-exempt | Art. 46 FDL 8/2017 |
| Residential property — long-term lease | VAT-exempt | Art. 46 FDL 8/2017 |
| Residential property — short-term lease (holiday home) | 5% VAT | Art. 19 CD 52/2017 |
| Commercial property — sale | 5% VAT | Art. 2 FDL 8/2017 |
| Commercial property — lease | 5% VAT | Art. 2 FDL 8/2017 |
| Broker commission | 5% VAT on commission | Art. 2 FDL 8/2017 |
| Property management fees | 5% VAT | Art. 2 FDL 8/2017 |
| DLD transfer fee (4%) | No VAT (authority fee) | FTA VATGRE1 |
What this means in practice for DACH buyers
For an off-plan or residential ready investment, no 5% VAT is added to the purchase price — an additional burden often assumed by DACH buyers that simply does not exist.
Ancillary costs do shift, however, due to VAT: a 2% broker fee effectively becomes 2.1% including VAT — see total cost structure of a Dubai property purchase.
Anyone letting short-term (e.g. Airbnb/holiday home) becomes liable for VAT from AED 375,000 annual turnover and must register — relevant for buy-to-let strategies.
Commercial properties are fully VAT-liable — irrelevant, however, for the DACH buyer majority (residential).
German value-added tax is unaffected by all of this: there is no German VAT on a UAE real estate transaction (place-of-supply principle § 3a UStG [German VAT Act]: location of the property).
Sources
UAE Federal Decree-Law No. 8 of 2017 — Value Added Tax UAE Cabinet Decision No. 52 of 2017 — Executive Regulations of the VAT Law FTA Public Clarification VATP003 — Real Estate FTA VAT Real Estate Guide — VATGRE1 § 3a UStG — place-of-supply principle for property-related services
Note: For mixed use (e.g. serviced apartment, hotel apartment), special rules apply under VATGRE1. A concrete VAT assessment in individual cases should be clarified with a UAE-approved tax adviser.
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