Federal Tax Authority Simplifies VAT Refund Procedures for UAE Nationals Building New Residences
His Excellency Khalid Ali Al Bustani, Director General of the Federal Tax Authority (FTA), has announced that procedures to reclaim Value Added Tax (VAT) for UAE nationals who are building new residences have been simplified with electronic procedures.
The information came in a press release issued today, on the latest updates on the VAT REFUND FOR BUILDING NEW RESIDENCES BY UAE NATIONALS. In making the announcement, His Excellency said that the FTA was committed to adhering to the vision of the UAE’s wise leadership to develop a modern housing system and to deliver the best standards of life and well-being within the framework of care that the state provides as the focus of development plans and as part of the basic objectives of all initiatives and projects carried out by state institutions.
H.E. Al Bustani said: “The happiness of UAE citizens is top priority for the Federal Tax Authority. We are committed to implementing our services through the most advanced, innovative and easy-to-use digital systems.”
“The FTA is introducing tax legislation that reflects the Government’s directives to ensure the wellbeing of UAE citizens. With this in mind, we have provided a clear and transparent set of standards and criteria to facilitate VAT recovery on the building of new residences by UAE nationals,” he added.
His Excellency said that in the context of the leadership's keenness on housing stability for all segments of society, the UAE legislator has taken special care not to raise the burden on the UAE's citizens and residents. The supply of commercial real estate (sale or rent) is subject to the basic rate of VAT 5%, except for the supply during the first three years of construction, when it is subject to 0%.
He pointed out that supplying a housing unit for the first time within the first three years of its construction is subject to zero-rated VAT. All subsequent supplies of the same unit are exempt from tax, even if the supply is also made within the first three years of completion to equalize VAT treatment for home builders the UAE nationals can refund VAT incurred on the construction of new residential units.
His Excellency explained that the authority has specified the criteria and the documents that are required to be attached to the requests for reclaiming VAT to ensure that VAT recovery on the construction of new housing is only provided to citizens who meet the conditions. He said that accurate procedures were being implemented to prevent any attempts to evade taxes.
The FTA stressed the need for citizens who apply for VAT refunds on the construction of new housing to ensure that all forms related to the request for recovery are completed accurately and that all the required information is included in the requests to the processing of applications by specialists of the Commission in accordance with the set time limits. It called on UAE nationals to view the user guide available through its official website via the link: https://www.tax.gov.ae/ar/pdf/VAT-Refund-Building-New-Residences-by-UAE-Nationals-User-Guide-full.pdf
The guide offers a simplified breakdown of the procedure to follow when requesting a refund on ‘VAT for Building New Residences by UAE Nationals,’ as well as the documents to include for the FTA to consider the application.
The authority noted that the refund procedure can be completed on the FTA website (www.tax.gov.ae) and has three key conditions: the applicant must be an Emirati national, the monetary cost in question must have gone towards financing the construction of a new home that is to be used exclusively as a residential unit for the applicant and/or their family, and that the VAT refund only includes the money spent on establishing the unit, such as the amounts paid for building materials.
The FTA reiterated that the request must be submitted within six months from the completion date of the construction project, which precedes the date of occupancy of the building, or the date of issuance of a certificate of completion for the building by the competent authorities, or by another date determined by the authority.
The authority stated that the completion of the recovery request procedure is carried out through four simple electronic steps: the first is to download the VAT refund form available on the FTA website and the second is to complete the form, print it out and sign it (hand written forms will not be accepted). The third step consists of scanning the completed and signed form, along with supporting documents, and then submitting them in PDF format to [email protected] within the six months following the completion of the construction works. The supporting documents should include a copy of the applicant’s passport and Emirates ID, as well as the paperwork proving his/her ownership of the plot of land in question (such as utilities bills), which must also include the date of completion.
The fourth step is for applicants to submit the request, including the reference number, blueprints and invoices to the FTA or the verification bodies accredited by the authority, which are highlighted on its official website. These entities can issue an official ‘Verification Report’ document stating the amount of taxes paid versus the recoverable amount. The request needs to be received by the FTA within 15 days from the date the invoices were issued.
Following submission, applicants will be sent an email to confirm that the authority has received the documents and then another email within five working days to inform them whether or not they are entitled to the refund. Those declared eligible to recover their taxes will need to provide the reference number issued by the FTA for the application in question.
One of the basic conditions for the recovery of the tax on expenses is that these expenses relate to a newly built building exclusively used as a residence for the applicant and/or his family. The services of the contractor, including the services of builders, architects, engineers and any similar services being claimed for, should be those usually used by construction contractors in residential buildings - or residential construction sites - and be necessary for the successful completion of the construction process. Furniture or electrical appliances are not included.
"Global tax practices have underscored the importance of extending VAT on goods and services, reducing exemptions and exceptions in the system to preserve tax revenues and preventing tax evasion practices," said Khalid Ali Al Bustani. “It would be difficult for contractors and construction consultants involved in the procurement process to track what is exempt from VAT – this is why authority cannot allow the contractor to determine when the tax is collected, as it could lead to the possibility of tax evasion,” he added.
His Excellency stressed the keenness of the authority to ease compliance procedures on citizens and contractors by requesting that they submit their refund application only once the construction of their residences has been completed, rather than repeating the same procedure throughout the construction process and having to provide the requirements for recovery multiple times during the construction period. He reiterated that the approval of a VAT refund will be given 20 days from the date of receipt of the application and supporting documents, with five working days for the reimbursement to be delivered to successful applicants.
Federal Tax Authority
By virtue of this Federal Law by Decree a public federal authority shall be established under the name of the Federal Tax Authority. The headquarters of the authority shall be located in the city of Abu Dhabi. The authority shall be in charge of managing and collecting federal taxes and related fines, distributing tax-generated revenues and applying the tax-related procedures in force in the UAE.
The authority shall be managed by a board of directors chaired by the Minister of Finance and a sufficient number of members to be appointed and remunerated by a Cabinet resolution, based on the chairman’s nomination. The authority shall have an independent annual budget that shall be deemed as public funds and exempted from all taxes and fees.
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