This blog article has been prepared to help you successfully complete your VAT Refund Request for building a new house (“Refund Request”) if you are a natural person who is a national of the United Arab Emirates. Where a UAE National (hold a Family Book) owns or acquires land in the UAE on which he / she builds or commissions the construction of his / her own residence, he / she is entitled to request one special refund from the FTA for the VAT incurred on certain expenses related to the construction of a new residence, (in the case of retention payments where an additional application may be submitted) subject to certain conditions stated as per the Article 66 of the Executive Regulation.

Firstly, a new residence VAT Refund Request should be submitted to the FTA (the “Refund Request”) on the FTA e-Services portal along with the requested supporting documentation, including the details of the applicant and property.

If the initial assessment of the application is successful (i.e., the applicant is eligible for a refund), additional documentation will be requested, either by the FTA, Once the application is reviewed it will inform the FTA of the outcomes of verification. Following this, the FTA will notify the applicant if the refund claim is approved, amended or rejected.

Type of ‘residence building’ for VAT purposes

The term ‘residence’ refers to any building used predominantly as a private home of a natural person, including fixtures and fittings belonging thereto and enjoyed therewith. This would include town houses and villas which comprise at least of cooking and washroom/bathroom facilities in addition to sleeping quarters, subsequent attachment to the residence would not be regarded and Detached structures subsequently built on the same plot would also not be regarded as a ‘residence’ for purposes of the refund.

Criteria relating to the nature of expenses:

VAT may be recovered in respect of the following categories of expenses

1. Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances.
2. Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of a residence.
3. VAT incurred on transport costs and clearing agent fees on importation of building material may be recovered to the extent these costs are incurred which are directly in connected for construction.

Time line for the application

The Refund Request must be sent to the FTA within 6 months from the date of completion of the newly built residence which is the earlier of the date.

• The residence becomes occupied.
• When it is certified as completed by a competent authority in the UAE (the Building Completion Certificate).

It should be noted that the date the residence becomes occupied should be determined based on facts. The applicant is required to obtain and retain documentary proof substantiating the date on which he/she occupied the residence.

There are certain circumstances, a person may find it impossible to apply for a refund before the lapse of the 6-month period from the date of completion specified above.

• There are reasons which prevent the UAE national from submitting a complete refund claim on time. Such reasons may include, for example, the absence of the UAE national from the UAE due to a military service or illness. It should be noted that the FTA has discretion to accept the reasons provided by the applicant for the inability to submit the application on time.
• There is a legal dispute related to the new residence.
• There are some pending technical issues which require further work for the construction of the new residence to be completed and the residence be ready for occupancy.

VAT refund on Retention payments

Where the UAE national intends to make such payments, the UAE national should indicate so when filing the initial application for the refund. Once the UAE national makes a retention payment, he or she will be entitled to submit a subsequent claim to the FTA to recover VAT related to the retention payment.

Documents must retain during application process

1. Copy of the applicant’s Emirates ID.
2. Copy of the applicant’s Family Book.
3. Copy of the declaration letter from funding body if the house is funded by a government body or other funder.
4. Copy of the property completion certificate and building permit.
5. Copy of your property site plan.
6. Documentary proof to support that you own the plot of land in the UAE.
7. Copy of the letter/certificate issued and stamped by your bank which includes details such as the account holder’s name, bank’s name and the IBAN.
8. Other documentations to support the date the building is occupied (if required).

The FTA may require you to provide originals of any documents submitted.

Additional documents may be required during FTA reviewing process

The additional documents which may need to be submitted to the Verification Body include:

1. Copies of the construction contract (including addendums).
2. Copies of the consultancy agreement (including addendums).
3. Copies of variation orders.
4. Copies of invoices that include returned items.
5. Copies of credit notes.
6. lump-sum tax invoices and proof of payments (for example, receipts) provided by the contractor and the consultant to the owner
7. Relevant tax invoices and proof of payments (for example, receipts). Tax voices should include the name of the owner (i.e. the applicant), valid TRNs and the correct VAT amounts, Simplified tax invoices will not be accepted.

Processing of the Refund by the FTA

Once the verification has completed, you will receive a notification of the results by email, including the total VAT that will be refunded. Following the above, the FTA will make the payment within 5 business days from the date the FTA approved the payment to the applicant.

We, Crevaty Tax Consultants can assist you to apply refunds. More information please contact us.