Commercial property VAT: separate price, cash and recovery
VAT can change the cash needed to complete a commercial property purchase. Separate three questions: what price has been quoted, what tax is due on the transaction, and whether the buyer can recover any input tax. These answers should be confirmed for the actual parties and structure.
Clarify whether the asking price includes VAT
The FTA's Real Estate VAT Guide describes the standard 5% treatment for supplies of commercial real estate, including sale and lease. Specific transaction treatment and the buyer's recovery position still require assessment.
For illustration, if AED 6 million is a VAT-exclusive price and the transaction is subject to 5% VAT, the tax amount is AED 300,000 and the combined amount is AED 6.3 million. If AED 6 million is explicitly VAT-inclusive at 5%, the embedded tax is approximately AED 285,714.29. The same headline number therefore produces different cash calculations.
These examples exclude registration and other acquisition charges. They are not a tax determination for a particular property.
Keep recovery separate from completion cash
Even where recovery may be available, do not automatically deduct VAT from the cash needed on completion. Ask your tax adviser to confirm eligibility, evidence, timing and the treatment of your intended use. A timing gap can matter to a buyer who has allocated most available funds to the purchase.
| Question | Document or confirmation |
|---|---|
| Is the price inclusive or exclusive? | Written commercial terms |
| What is the transaction's VAT treatment? | Case-specific tax assessment |
| Who accounts for the tax and how? | Agreed settlement process |
| Can the buyer recover it? | Eligibility and documentation review |
| When could recovery occur? | Cash-flow assumption confirmed by the adviser |
Do not assume every tenanted sale has the same treatment
The FTA publishes separate guidance on transfers of a business as a going concern. Whether a transaction meets the relevant conditions must be assessed; the presence of a tenant alone should not be treated as a conclusion.
Before signing, obtain a single acquisition statement that reconciles the property price, tax, registration charges and other agreed payments. Record disputed or unconfirmed tax assumptions separately. This keeps the investment comparison transparent and prevents a possible future recovery from being confused with money already available for the purchase.
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Related guide: Planning Cash for a Dubai Property Purchase.
Sources and scope
Official references checked on 29 October 2026: FTA: Real Estate VAT Guide, FTA: Transfer of a Business as a Going Concern. The comparison methods and hypothetical examples are Livrichy planning aids. Official sources do not endorse the examples; confirm current requirements for the actual transaction.