VAT Refund on Building New Homes for UAE Nationals

The Federal Tax Authority (FTA) has set three requirements and procedures for UAE nationals to refund Value Added Tax (VAT) incurred on the new residences.

The conditions state that in order to refund VAT, applicants must be UAE national; the monetary cost in question must have gone towards financing the construction of a new residence, set to be used exclusively as a residential unit for the applicant and/or their family; and finally, the VAT refund only includes the money spent on establishing the unit, such as the amounts paid as building materials.

The FTA issued a comprehensive guide that clarifies the VAT refund process, publishing it on its official website. The guide can be viewed on the following link: https://www.tax.gov.ae/ar/pdf/VAT-Refund-Building-New-Residences-by-UAE-Nationals-User-Guide-full.pdf

In a press release issued today, the Authority explained that UAE citizens have the right to recover VAT when constructing their own residences. They ought to submit a request to recover the tax incurred on construction costs from the FTA. 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 another date determined by the Federal Tax Authority whatever comes first.

FTA Director General His Excellency Khalid Ali Al Bustani said: “The Authority has been providing transparent standards, procedures and mechanisms to ensure seamless procedures for citizens looking to recover Value Added Tax incurred on the construction of new residences. This, in turn, leads to achieving the vision of our wise leadership to develop a modern, stable housing system in the UAE.”

“The Authority has shown its dedication in implementing tax procedures that reflects UAE’s leaders vision in achieving the happiness and prosperity of UAE’s citizens” H.E. added.

The FTA went on to outline that submitting a request for VAT refund is done through a four-step online procedure: First, applicants download a VAT Refund form from the FTA website: www.tax.gov.ae; second, the form must be duly filled out, printed and signed – hand-written documents will not be accepted.

The third step consists of scanning the form once filled and signed, along with supporting documents, and submitting them in PDF format on homebuilders@tax.gov.ae in the six months following the completion of the construction works. The supporting documents 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, which must also include the date of completion. 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 for 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.

The fourth and final step is for eligible applicants to submit the request, including the reference number, blueprints, and invoices to a Verification body accredited by the FTA. The Authority will be announcing all accredited Verification bodies on its website. These entities can issue an official document called “Verification Report” stating the amount of taxes paid versus the recoverable amount, and then send it to the FTA within 15 working days from the date the invoices were issued. The Federal Tax Authority can then take up to 20 working days to process the final request and then an extra five working days to refund the recoverable amount to the applicant.

The Federal Tax Authority confirmed that no fees apply on requests for VAT recovery on the construction of new housing units, noting that there are fees charged by the accredited Verification bodies in return for the services they provide.

The Authority underlined three main criteria for the expenses in question, namely: Said expenses must be spent to finance the construction of a new home, set to be used exclusively as a residential unit for the applicant and/or their family. Additionally, the contractor services must be indispensable to the successful completion of the construction project (these include builders, engineers, architects, and any other similar services). And last but not least, the products used must be of the variety usually used by contractors on construction projects – excluding furniture and appliances.