VAT Arrives and Residency Reform Is on the Agenda

Value added tax takes effect across the UAE today at a standard rate of 5%. At the same time, discussion is growing about reforms to residency rules that would give investors and long-term residents more security. Both developments matter for the property market, in different ways.

VAT and property

• Residential sales and rents: resale of residential property and residential leases are generally exempt.
• New homes: the first supply of new residential property is zero-rated.
• Commercial property: sales and leases are subject to the standard rate.
• Services: agency fees, maintenance and many related services carry VAT.

What it means for owners

For most residential owners and tenants, the direct effect is limited, but costs such as service charges, maintenance and brokerage may rise slightly.

Why residency reform matters

Most residents' visas are tied to employment and renewed every few years. Longer-term residency, particularly for investors and skilled professionals, would encourage people to settle, buy homes and invest for the long term.

Current property visa

Buyers of property above a certain value can already obtain a renewable residence visa. Clearer, longer-term options would strengthen the link between ownership and residency.

What to watch

Any announcement on long-term visas, their eligibility criteria and the role of property investment will be important for the market.

VAT on service charges and fees

Although most residential sales and leases are exempt from VAT, many of the services owners pay for are not. Agency commissions, property management fees, maintenance contracts and some service charge components may now include VAT at 5%. Owners should review invoices and budgets to understand how their costs have changed. Landlords letting commercial property must consider whether they need to register for VAT and charge it on rents. Developers selling new homes will apply zero-rating to the first sale, but buyers should check how fees and extras are treated in their contracts. Keeping clear records of property-related expenses will be important for owners who need to account for VAT in future.

Our view

VAT adds modest costs but brings the UAE in line with international practice. Residency reform, if it comes, could be one of the most positive developments for long-term demand.