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UAE VAT Fundamentals/Module 12: Real Estate
6 min

Real Estate-Related Services and Mixed-Use Apportionment

VAT treatment of real estate-related services (agency, management, construction) and apportionment for mixed-use properties.

Real Estate-Related Services

Agency and Brokerage

Real estate agency and brokerage services follow the VAT treatment of the underlying property:

  • Commercial property transactions: Standard-rated at 5%.
  • Residential property transactions: Exempt (matching the exempt residential supply).
  • First supply of new residential: Zero-rated (matching the zero-rated property).

Property Management

Property management services follow the treatment of the property managed:

  • Managing commercial property: Standard-rated at 5%.
  • Managing residential property: Exempt.

Construction Services

Construction of new residential buildings is standard-rated at 5% (the contractor charges VAT), but the developer can recover this as input tax and then zero-rate the first supply. Construction of commercial buildings is standard-rated at 5%.

Mixed-Use Apportionment

For mixed-use properties (commercial + residential), input tax on shared costs must be apportioned:

  1. Directly attributable costs: Fully recoverable (commercial) or not recoverable (residential).
  2. Shared costs: Apportioned based on the floor area or value ratio of commercial to total space.

Worked Example

A mixed-use building has 70% commercial space and 30% residential space. Annual maintenance costs are AED 100,000 + AED 5,000 VAT. The landlord can recover 70% of the VAT (AED 3,500) as input tax (attributable to commercial) and cannot recover 30% (AED 1,500, attributable to exempt residential).

Sale of Real Estate Services

Services related to real estate (valuation, surveying, legal) follow the place of supply rule: the place of supply is where the property is located. For UAE property, these services are subject to UAE VAT.

Practical UAE example

**Dubai Property Management Company**: A property management company manages a mixed-use building with 60% commercial and 40% residential. Management fees are AED 120,000/year + 5% VAT = AED 126,000. The 5% VAT on the commercial portion (60%) = AED 3,600 is charged to the commercial tenants (who can recover it). The residential portion (40%) = AED 2,400 is exempt — not charged to residential tenants. Input tax on shared maintenance costs is apportioned 60% recoverable, 40% not recoverable.

Key takeaways

  • Real estate services follow the treatment of the underlying property.
  • Commercial property services are standard-rated; residential are exempt.
  • Construction is standard-rated; developers recover input tax and zero-rate first supply.
  • Mixed-use properties require input tax apportionment based on commercial/residential ratio.

Authoritative sources

Federal Decree-Law No. 8 of 2017 on Value Added Tax

United Arab Emirates — Federal Tax Authority · The VAT Law — Articles 1 to 82 (as amended by Federal Decree-Law No. 18 of 2022)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT

United Arab Emirates — Cabinet / Federal Tax Authority · Executive Regulations (as amended by Cabinet Decisions No. 46/2020, 24/2021, 88/2021, 99/2022, 100/2024, and 100/2025)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

FTA — VAT Guides, References & Public Clarifications

UAE Federal Tax Authority · Taxable person guides, tax invoice guides, input tax guides, designated zones, real estate

Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Knowledge check

1. A real estate agent sells an existing residential villa. What is the VAT treatment of the agent's commission?

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This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.