A Guide to VAT Refund for UAE Nationals Building New Residences

UAE nationals constructing new residences for their personal use are eligible to reclaim VAT incurred on the expenses. To avail of the VAT refund on the expenses, the UAE nationals should present a request to the Federal Tax Authority (FTA) along with adequate documentation. The application can be submitted to the FTA through tax agents in Dubai who can help you ensure compliance with the applicable laws.

UAE nationals who own or acquire land in the UAE and construct their residences can request a special refund from the FTA for the VAT incurred on certain expenses related to the construction of a new residence. The eligibility to refund VAT in the UAE is subject to certain conditions stated in Article 66 of the Executive Regulation of the Cabinet Decision No.52 of 2017. VAT consultants in Dubai can advise you on the conditions and the procedure to request the VAT refund from the FTA. Read ahead to know further about the process.

Persons Eligible for VAT Refund in the UAE

As per the FTA’s guidance on the VAT refund scheme for residences, the claim can be made only by a UAE national. The claimant should be a natural person, which means corporate entities are not allowed to apply for the refund request.  Most importantly, the applicants should hold a UAE Family Book to be eligible for the VAT refund scheme. Seek the assistance of FTA-approved tax agents in Dubai to avail of the benefits of the tax refund scheme.

Definition of Residence for VAT in the UAE

As per the FTA Guide (VATGRH1) issued on May 2021, the term residence means any building (including townhouses & villas) used mainly as a private home or a natural person (UAE national). The definition of residence includes fixtures and fittings belonging thereto and enjoyed therewith, which comprise at least cooking and washroom/bathroom facilities in addition to sleeping quarters.

Subsequent attachments to the residence or detached structures later built on the same plot won’t be considered as a residence for a VAT refund in the UAE. However, a VAT refund will be allowed if the attachment/detached structure meets the FTA’s definition of a residence on a standalone basis. For instance, VAT incurred on the related construction cost of a second house built on the same plot with cooking, washroom, and sleeping facilities can be recovered as per the scheme if all the other requirements are met.

Buildings Not Eligible for VAT Refund Scheme

As per the FTA Guidance, VAT incurred on the construction costs of certain types of buildings can’t be reclaimed. Furthermore, VAT incurred on the construction costs of certain subsequent attachments/detachments may not be recoverable. VAT consultants in Dubai can help you with determining the VAT refund eligibility of the buildings. VAT incurred on the following types of structures can’t be recovered:

• VAT incurred on the costs of a second-floor subsequently built on an existing residence with cooking, washroom, and sleeping facilities may not be recovered
• VAT incurred on the building costs of a playroom added to the residence at a later stage can’t be recovered as per the VAT refund scheme
• VAT incurred on the construction costs of buildings and units registered for commercial purposes, including hotel apartments can’t be recovered under the scheme. It’s because such buildings won’t be qualified as residences.

Category of Expenses Eligible for VAT Refund in the UAE

The VAT on expenses you have incurred on constructing a residence can be refunded subject to certain conditions stipulated by the FTA. VAT consultants in Dubai can help you determine if the expenses are eligible for a VAT refund in the UAE. The following types of expenses can be refunded:

• Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances
• Services provided by contractors, including services of builders, architects, engineers, and other similar services essential for the construction of a residence

Deadline for Submitting the Application

Applicants are required to submit the refund request to the FTA within 12 months from the date of completion of the newly constructed residence which is the earlier of the date:

• The residence becomes occupied;

or

• When a UAE competent authority certifies that the construction of the building has been completed (the Building Completion Certificate).

Applicants should note that the date on which the residence becomes occupied must be determined based on facts.  The applicant is required to obtain and retain documentary evidence substantiating the date on which he/she occupied the residence. Consult with VAT consultants in Dubai for further details on the deadline.

Consult with the Best VAT Consultants in Dubai, UAE

The UAE nationals can recover VAT incurred on constructing new residences, provided all the conditions are met. However, applying for the refund request is a complex process, which can be navigated with the help of VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA has a team of highly qualified tax agents in Dubai, UAE who are well-versed in VAT accounting, VAT return filing, VAT refunds, VAT penalty appeal services etc.  JCA is an approved tax agency providing bespoke tax consultancy services in Dubai. We are the leading tax agents in the UAE approved by the FTA who can help you with tax-related matters.