VAT clause in a commercial lease
Our lease does not mention VAT. Can the landlord add 5 percent now?
The situation
If the landlord is VAT registered and the supply is taxable, VAT is due. Whether the tenant must pay it on top depends on the contract wording.
The law
- Art 3, Federal Decree-Law 8 of 2017: 5 percent on taxable supplies
What it means for you
Many contracts are silent, which leads to disputes. Example: a lease of AED 100,000 with no VAT clause; the landlord says VAT is extra, the tenant says it is included. Agree an addendum. Going forward, every commercial lease should state that rent excludes VAT.
What to do
- Read the lease for any tax clause.
- Agree an addendum on VAT.
- Get a tax invoice with TRN.
- Use clear VAT wording in future leases.
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