Developer with zero-rated sales and refunds
We are a small developer selling new villas. Can we recover VAT on construction?
The situation
First sales of new residential buildings within 3 years are zero-rated, so input VAT on construction is recoverable. Later exempt sales or rentals change that.
The law
- Art 45(9), Federal Decree-Law 8 of 2017: Zero rating of first residential supply
- Art 74, Federal Decree-Law 8 of 2017 as amended from 1 January 2026: Refund of excess recoverable tax; carry forward or refund only within 5 years
What it means for you
Example: VAT of AED 400,000 on construction of villas all sold for the first time within 3 years can be recovered and refunded. If some villas are rented instead, they become exempt supplies and the input VAT on them must be adjusted. Plan sales or leasing early.
What to do
- Track completion dates and first sales.
- Recover VAT on construction for zero-rated sales.
- Adjust input VAT if units are leased.
- Claim refunds within 5 years.
We can do this for youVAT on real estate: residential and commercial sales and leases, first supply zero rating, bare land and landlord registration: AED 1,500