Commercial Property sales and Lease attract VAT in UAE

The UAE implementing value-added tax (VAT) from January 1 2018, and businesses can start now register on the website of the Federal Tax Authority (FTA). Commercial property sales and leases will be subject to the standard rate of VAT (five percent), residential property sales and leases will be exempt from VAT, with the exception of the first sale of new residential property, which will be subject to the zero rate of VAT, and bare land will be exempt from VAT.

What is a supply in relation to real estate?

A supply of real estate may include the sale, lease or giving the right in any real estate.

What is a residential building for VAT purposes?

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as a main place of residence. It does not include:

• Any place that is not a building fixed to the ground and can be moved without being damaged.
• Any building that is used as a hotel, motel, bed and breakfast establishment or hospital or the like.
• A serviced apartment for which services in addition to the supply of accommodation are provided.
• Any building constructed or converted without lawful authority

 What is a commercial building for VAT purposes?

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc

Is a residential building subject to VAT?

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years

Does the owner of real estate have to register for VAT?

The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds Dh375,000 or it is expected that they will exceed Dh375,000 over the coming 30 days.

Can a real estate owner recover VAT paid in relation to real estate?

An owner of the residential building will not be able to recover VAT in respect of expenses related to the exempt supply of the residential buildings.An owner of a commercial building will generally be able to recover VAT in respect of expenses related to the supply of the building.

How is a mixed-use building (residential and commercial) treated for VAT?

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

Will VAT be charged for the property I am renting?

The rent of residential building will generally be exempt from the VAT.The rent of commercial building will be subject to VAT at 5%.

Fines to replace court trials in minor offences in Dubai from December 4th 2017

From December 4, 2017, on-wards, prosecutors in Dubai will be able to fine suspects involved in certain types of misdemeanor and minor offenses, including some bounced cheque and cursing cases, instead of referring them to court.

Dubai’s Attorney-General Essam Eisa Al Humaidan issued decision No. 88 of 2017, according to which prosecutors of the of Deira, Bur Dubai, and Family and Juvenile's prosecution wings can start issuing criminal orders starting December 4.

According to Al Humaidan’s decision, members of the three prosecution wings can fine suspects involved in specific minor offences rather than indicting them and referring them to the Dubai Misdemeanours Court to stand trial.

The list of misdemeanours is limited to certain minor offences including bounced cheques up to Dh200,000, failing to pay for food, car rent or room rent up to Dh50,000, defamation and cursing [excluding government sector employees], attempted suicide and disturbing victims through the use of telecommunication systems.

Prosecutor-General Mohammad Ali Rustom, Head of the Family and Juveniles Prosecution, told Gulf News on Monday: “The criminal order is an excellent step and a timely one as well. It has come to solve many hindrances and delays that litigants face. The litigation process requires a prosecutor to issue a decision on whether or not to indict a suspect and refer him/her to court or dismiss the case. Litigants [suspects and/or victims] used to wait for long periods … but now the criminal order has come to save the time for litigants and, remarkably, tourists.”

Dubai is a major international tourist hub attracting millions of visitors every year, many of whom could get involved in misdemeanours, he said.

“There have been cases involving tourists, who came here to enjoy their holidays but ended up getting stuck for weeks and months after having committed minor offences. In certain incidents, some litigants had to wait for six months. The criminal order reduces the waiting time for tourists, who end up being involved in such misdemeanours, and who do not have to wait for long periods waiting to be referred to the Misdemeanours Court … in case they are guilty, they pay a fine rather than waiting,” Rustom told Gulf News.

A chief prosecutor, who preferred not to be named, said the criminal order assists Dubai Public Prosecution in achieving its goals to make procedures faster and easier to complete for litigants in cases pertaining to specific minor crimes.

According to the Attorney-General’s decision, a copy of which was obtained by Gulf News, Rustom; Prosecutor-General Yousuf Foulad, head of the Deira Prosecution; and Prosecutor-General Sami Al Shamsi, head of the Bur Dubai Prosecution, are entitled to assign a prosecutor to issue, amend or cancel a criminal order.

New rule on vehicle and driving license services in Dubai

H.H. Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of Dubai Executive Council has issued Executive Council Resolution No. (57) of 2017 pertaining to Vehicle and Driving Licence Services.

The Resolution aims to enable RTA’s Licensing Agency to develop its services and utilise applications and smart solutions to facilitate the delivery of services.

Pursuant to the Resolution, the agency is responsible for issuance and renewal of driving licences and learning permits, conducting driving tests, issuance and renewal of occupational permits, desert driving permits, heavy bus and heavy truck driving permits, and special nature driving permits, according to the terms and conditions outlined in Federal Traffic Law No. (21) of 1995 and other approved bylaws.

Pursuant to the Resolution, RTA’s Licencing Agency is responsible for specifying the locations and special procedures for driving licences and permits, issuance and renewal of examiners’ permits according to RTA’s approved procedures, establishing and approving a system for classifying examiners, approving the specification of testing vehicles, issuing licences for the drivers’ testing yard and conducting assessments, monitoring and inspections to ensure accurate implementation of this Resolution.

According to the Resolution, the RTA is authorised to collect fees for the licencing and permit services listed in Appendix (1) of this Resolution. People with disabilities and people with special needs enjoy 50 percent discount on all services included in this Resolution.

RTA’s Director-General and Chairman of the Board of Executive Directors will issue the required bylaws to implement this Resolution. These bylaws will be published in the Dubai Government’s Official Gazette.

This Resolution annuls any other legislation that contradicts or challenges its articles. The Resolution shall be published in the Official Gazette and shall be considered valid following 60 days of the date of publication.

Sheikh Mohammed amends law on Interim Property Registration in Dubai

In his capacity as Ruler of Dubai, the UAE's Vice President and Prime Minister, His Highness Sheikh Mohammed bin Rashid Al Maktoum, has issued Law No. (19) of 2017 partially amending Law No. (13) of 2008 on Interim Property Registration in Dubai. The amendments aim to protect real estate investors and developers.

The new Law amends Article (11) of Law No. (13) of 2008, which specifies policies and procedures that will be applied in cases of breaches of sale contracts by the buyer. The Law specifies that in such an event, the developer must notify the Dubai Land Department (DLD). Once the notification is received, the Department must give a 30-day notice to the purchaser. The notice must be dated and given in writing and delivered to the purchaser directly by registered mail, electronic mail or any other method specified by the Department. If the developer and buyer reach an amicable settlement, it must be added to the sale contract and signed by both parties. If the buyer fails to fulfil contractual obligations or accept an amicable settlement, the Department may issue an official document stating that the developer has fulfilled his legal obligations, specifying the percentage of completion of the property.

After the developer receives this document from the Department, the developer is free to take any of the following actions: If the percentage of completion is over 80%, the developer can ask the purchaser to abide by the terms of the sale contract, confiscate the paid amounts and obligate the buyer to make the remainder of the payment specified in the contract or otherwise request the Department to auction the property to collect the remaining amount. The buyer is also obligated to pay any expenses arising from the auction. The developer may also void the sale contract solely, retain up to 40% of the sale contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.

If the percentage of completion is between 60% and 80%, the developer may void the sale contract solely, retain not more than 40% of the sale contract’s value and return the remaining amount to the purchaser within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
If the percentage of completion is less than 60%, the developer may void the sale contract solely, retain up to 25% of the sale contract’s value and return the remaining amount to the buyer within one year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.

If the developer did not initiate the work on the property for reasons beyond his control and without negligence, the developer may void the sale contract solely, deduct not more than 30% of the paid money and return the remaining amount to the purchaser within 60 days of the date of re-selling the property, whichever is earlier.

According to the new Law, if the project is cancelled by a resolution from RERA, the developer must refund all payments made by the buyer, pursuant to Law No. (8) of 2007 concerning Escrow Accounts for Real Estate Development in Dubai.

Pursuant to the new Law, the procedures prescribed in Article (11) of Law No. (13) of 2008 are not applicable to land sale contracts. Such a sale remains subject to provisions stated in the sale contract.

This Law annuls any other legislation that contradicts or challenges its articles and is valid from the date of its publication in the Official Gazette.

Registered businesses must file excise tax returns before 15th November in UAE

The Federal Tax Authority (FTA) has called upon businesses registered for the excise tax to file their October returns before the deadline on November 15, 2017, in order to avoid the penalties.

The authority has stressed the necessity of filing returns regularly before the 15th of every month for the previous tax period. All businesses registered for Excise Tax must pay the due tax on excisable goods (50 percent on carbonated drinks, 100 percent on tobacco products and energy drinks) to avoid penalties stipulated in Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of the Tax Laws in the UAE.

"Since the beginning of November, businesses registered for excise tax have been consistently complying with their requirements and deadlines, filing their tax returns on time. We urge those who haven't done so yet to file their returns before the deadline of November 15, 2017, and settle the payable tax stated in the submitted excise tax return, in order to fulfil their obligations according to the tax procedures in the UAE," Khalid Al Bustani, director-general of the Federal Tax Authority, said.

The Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of the Tax Laws in the UAE applies to all the listed violations in the Federal Law No. (7) of 2017 on Tax Procedures and Federal Decree-Law No. (7) of 2017 on excise tax. According to this, the failure of the registrant to submit the tax return within the timeframe specified in the Tax Law will subject them to an automatic Dh1,000 penalty in the first time and Dh2,000 in case of repetition within 24 months.

The Cabinet Decision also states that if a taxable person fails to settle the payable tax stated on the submitted tax return or tax assessment he/she was notified of, within the timeframe specified in the tax law, he will be obligated to pay a late payment penalty of 2 per cent of the unpaid tax - due immediately once the payment of payable tax is late; 4 per cent, due on the seventh day following the deadline for payment; and a 1 per cent daily penalty will be charged on any amount that is still unpaid one calendar month following the deadline for payment, with the upper ceiling being 300 per cent.

Businesses are also required to ensure the accuracy of the data being submitted, as the submittal of an incorrect tax return by the registrant can incur a fixed penalty of Dh3,000 plus a percentage-based penalty of up to 50 percent of the amount unpaid.