Cash locked in VAT is cash you cannot use to run your business

A practical guide to reclaiming VAT on commercial real estate in the UAE

Two weeks ago a client closed on a warehouse in Dubai. The seller charged 5% VAT on the sale, and the first question was simple. When can we get that money back. The answer is straightforward once you know the rules and the timing.

When VAT applies to commercial property

Sales and leases of commercial real estate are generally subject to 5% VAT. If you are VAT-registered and the property supports your taxable activities, the VAT you pay is usually recoverable as input tax.

Who can reclaim

You need three things

1. Active VAT registration
2. A valid tax invoice from the seller or landlord
3. An intention to pay the consideration (and, ultimately, payment)

If your business makes both taxable and exempt supplies, expect to apportion input VAT.

The recovery clock

Claim the input VAT in the tax period when you first hold a valid invoice and have the intention to pay. If that intention is documented later, claim in that later period. If you claimed but do not pay within six months of the agreed due date, you must reverse the recovery and reclaim when payment is actually made.

How to reclaim on a purchase

1. Get the invoice right Confirm the seller’s TRN, property details, VAT amount, and correct buyer details.
2. Use the property VAT payment workflow if required Some commercial sales require the buyer to pay VAT via the FTA portal’s “VAT payment for commercial property buyers.” Keep that receipt with your completion pack.
3. Record in your VAT return Book the input VAT in the correct return and keep all closing documents.
4. Retain records Real-estate records have a long retention period. Keep contracts, invoices, and proof of payment accordingly.

Special cases that change the answer

Transfer of a going concern Buying a tenanted building with an operating rental business may qualify as a TOGC. In that case the transfer is outside the scope of VAT, so there is nothing to reclaim. Test TOGC early at heads of terms.

Mixed-use or partially exempt activities If the building supports both taxable and exempt activities, apply an input-tax apportionment method and keep workings.

Tenants reclaiming VAT on rent A VAT-registered tenant making taxable supplies can typically recover VAT charged on commercial rent in the period the invoice and intention-to-pay conditions are met. Align payment approvals so recovery is not delayed.

If you missed a claim

Discover an error later

• Correct it in the next return if within adjustment limits, or
• File a voluntary disclosure where required. Maintain an audit trail showing invoice receipt, approval date, and payment date.

A simple pre-closing checklist

• Confirm VAT treatment of the deal and whether TOGC could apply
• Verify both parties’ TRNs and insist on a compliant tax invoice
• Map intended use of the property to your taxable activities
• Align internal approvals so intention to pay falls within the target return period
• Route consideration and any required VAT through the correct payment channel and archive all proofs
• Label the file for long-term retention

Bottom line

If you are VAT-registered and the property feeds into your taxable business, VAT on a commercial purchase is usually recoverable. The unlock is timing. Claim in the right period, reverse if payment slips beyond six months, and keep the documentation tight from day one.

Our team ASK Consultancy has extensive experience in helping you navigate UAE tax laws.