TaxSavvyAE

VAT on office and shop rent

I rent an office unit to a company. Do I add VAT?

The situation

Commercial leases are standard rated at 5 percent. If your commercial rent passes AED 375,000 in 12 months, you must register and charge VAT.

The law

  • Art 3, Federal Decree-Law 8 of 2017: 5 percent standard rate
  • Art 13, Federal Decree-Law 8 of 2017: Mandatory registration above AED 375,000 in 12 months or expected within 30 days

What it means for you

Example: one office rented at AED 150,000 a year is below the threshold, so no mandatory registration, though voluntary registration is possible above AED 187,500 of supplies or expenses. Three offices at AED 150,000 each total AED 450,000, so registration is needed. Write leases as rent plus VAT.

What to do

  1. Total commercial rent over 12 months.
  2. Register if above AED 375,000.
  3. Use leases that say rent excludes VAT.
  4. Invoice VAT from the effective date.

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

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