Mixed residential and commercial building
My building has shops on the ground floor and flats above. How does VAT work?
The situation
Each part is treated separately. Shop leases are standard rated and flat leases are exempt. Input VAT on shared costs must be apportioned.
The law
- Arts 45 and 46, Federal Decree-Law 8 of 2017: Different treatment for residential and commercial parts
What it means for you
Example: shop rent AED 500,000 and flat rent AED 900,000. You register because commercial rent passes AED 375,000, charge VAT on shop rent, and recover only part of VAT on shared costs like lifts and security. Keep separate leases and service charge splits.
What to do
- Split rent by commercial and residential.
- Register if commercial rent passes AED 375,000.
- Apportion shared costs.
- Keep separate leases for each part.
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