UAE nationals can claim VAT refund on home construction

The Federal Tax Authority has issued a guide with details for home owners on how to claim the refund.

Emirati house owners have the right to a five per cent value added tax (VAT) refund when constructing their homes, the Federal Tax Authority (FTA) has stated.

The Authority has issued a guide with details for home owners on how to claim the refund. It clarifies that only UAE citizens have the right to ask for the refund. They need no new account on the Authority’s website, and only need to download and fill a form and submit it back so the Authority

Anurag Chaturvedi, senior director at Crowe Horwath, told Khaleej Times that UAE nationals can claim the VAT refund against the construction expenses for a residential building, if they construct it for themselves or their family members.

“UAE nationals can claim the refund against a newly constructed building to be used solely as residence, under Article (66) of Cabinet Decision No. (52) of 2017 on the Executive Regulations, of the Federal Decree-Law No (8) of 2017 on Value Added Tax,” he revealed.

Furthermore, the VAT refund is not allowed in relation to a building that will not be used solely as a residence by the person or the person’s family. “For example, it is not to be used as a hotel, guest house, hospital, or if the property is to be used for rental purposes or for any other purpose not consistent with it being used as a residence,” Chaturvedi said.

Nirav Shah, director at Fame Advisory DMCC, also stressed that the refund is only valid if the building is going to be used by the owner and his family. He also noted that the refund can only be claimed by Emirati nationals.

According to the guide issued by the FTA, an Emirati owner has the right to ask for the VAT refund if he bought a piece of land and allowed an authorised person or company to establish a housing unit on it. The guide says that the VAT refund only includes the money spent on establishing the unit, adding that it includes the amounts paid as building materials, except for electricity products of furniture or green areas.

On the other hand, the refund also includes VAT paid for doors, fire alarms systems, floors, kitchens, health units, bathrooms, windows, and electricity cables. A third entity is going to review the housing units to approve the refund and its amount after the Emirati owner submits the form. Moreover, the owner needs documents that prove his ownership for the unit, show the date of issuing the certification of establishment, prove the ownership of the land and show the value of VAT paid during the process.

Chaturvedi also noted that the VAT refund will be claimed after completion of the new building which is ready to use. The owner must file a VAT refund application after getting registration with the FTA within six months from the date of completion of the newly built residence. Processing can take up to 20 days.

“A newly built residence is considered complete at the date the residence becomes occupied, or the date when it is certified as completed by a competent authority in the state, or as may otherwise be stipulated by the Authority,” he said. “Where the Authority has repaid tax and following the receipt of such repayment, if the person used the building for rental or any other commercial purpose, then he will be required to repay the amount of the tax that was claimed by him. The UAE national can claim VAT against construction related expenses excluding furniture or electrical appliances.”