As per the Executive regulation Art. (66), Where a UAE National owns or acquires land in the UAE on which they build or commission the construction of their residence, they are entitled to request a special refund from the FTA for the VAT incurred on certain expenses related to the construction of a new residence, the refund subjects to certain conditions.
WHO IS ELIGIBLE FOR THE VAT REFUND FOR BUILDING NEW RESIDENCIES?
The VAT refund may only be made by a natural person who is a national of the United Arab Emirates and holds a Family Book.
WHAT ARE THE CONDITIONS TO BE ELIGIBLE FOR THIS VAT REFUND?
- The claim should be made by a natural person who is a UAE national;
- The claim should relate to a newly constructed building to be used solely as a residence of the person or the person’s family; and
- The claim should not be made in connection with a building that will not be used solely as a residence by the person or his/her family, such as a hotel, guest house, hospital, or other similar purposes.
After receiving the VAT refund for the building new residencies, If the building will be used for any purpose other than being the residence of a UAE National, the FTA will require the applicant to repay any VAT refunded to him as a result of breaching the above conditions.
WHAT IS THE NATURE OF EXPENSES ON WHICH REFUND CAN BE CLAIMED?
VAT may be recovered in respect of the following categories of expenses:
- Building materials, being goods of a type commonly incorporated by builders in a residential building or its site, but not including furniture or electrical appliances; and
- Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of a residence.
VAT incurred on transport costs and clearing agent fees on importation of building material may be recovered to the extent these costs are incurred directly in connection with building materials.
Goods and materials are generally considered to be incorporated into a building when they are fixed in such a way that the fixing or removal of those goods would require the use of tools or result in the need for remedial work to the fabric of the building or cause damage to the goods/materials themselves.
EXAMPLES OF GOODS THAT ARE NOT CONSIDERED TO BE INCORPORATED INTO THE BUILDING INCLUDE:
- Removable appliances;
- Furniture such as sofas, tables, chairs;
- Landscaping, such as trees, grass and plants; and
- Swimming pools.
EXAMPLES OF GOODS THAT ARE CONSIDERED TO BE INCORPORATED INTO THE BUILDING AND WOULD BE ELIGIBLE FOR A REFUND OF VAT INCLUDE:
- Central air conditioning and split units;
- Fire alarms and smoke detectors;
- Flooring (excluding carpets);
- Kitchen sinks, work surfaces and fitted cupboards;
- Sanitary units;
- Shower units;
- Window frames and glazing; and
- Wiring when embedded inside the structure of the building.
WHAT IS THE DEADLINE FOR SUBMITTING THE VAT REFUND REQUEST?
The Refund Request must be submitted to the FTA within 12 months from the date of completion of the newly built residence, which is the earlier of the date:
- The residence becomes occupied; or,
- When it is certified as completed by a competent authority in the UAE (the Building Completion Certificate).
WHEN TO RECOVER THE VAT OF THE RETENTION PAYMENTS?
Where the UAE National intends to make the retention payments, the UAE National should indicate so when filing the initial application for the refund.
Once the UAE National makes a retention payment, they will be entitled to submit a subsequent claim to the FTA to recover VAT related to the retention payment. The claim should be made within six months from the date of making the payment and subject to provision of proof thereof, for example, a receipt.
XB4 is one of the leading, experienced, and professional VAT consultants in the UAE that can help you to recover the VAT incurred on building new residencies. We suggest having a detailed verification of the eligible documents before proceeding for submitting the application. Our VAT Consultants will conduct a detailed review before submitting your VAT Refund application for building new residencies.