How UAE Citizens Can Claim an Average of AED 25,000 Back on New Home Construction Costs?

The UAE’s dream home is now more affordable, thanks to a significant change by the Federal Tax Authority. The government has broadened the range of construction costs for which Value Added Tax (VAT) refunds will be available, offering a financial boost to Emiratis as part of the ‘Year of Family’ efforts.

The new refund scheme will be expected to see many more refunds approved for more than AED 1 billion, and it will benefit thousands of homeowners by mitigating total construction expenses. Based on FTA’s estimates, the average applicant can expect to receive approximately AED 25,000 for VAT refunds that will add up to one of the most significant benefits for homeowners in the last few years.

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What Is the New VAT Refund Expansion?

This new initiative expands on the width of residential building costs eligible for a full 5% VAT rebate. A few extra homeowners features and structural aspects were previously not included in the reimbursement program, causing homeowners to take any extra expenses.

The new system allows for the reimbursement of the VAT paid on various modern and necessary renovation projects in housing, related to several home improvements made in a single residential plot.

Newly Eligible Construction Expenses

The new policy acknowledges that today’s families have evolved: it’s designed to include a number of lifestyle and infrastructure improvements.

Homeowners who are eligible may be able to tax offset for smart home systems, integrated security networks, automated garage doors and smart home automation solutions. This includes recreational facilities including home gyms and indoor game rooms which boost healthier family living spaces.

Additional items that can be added to the eligible expense list are outdoor swimming pools, decorative fountains, landscaping projects, and water installations. Furthermore, a previous inability to reclaim VAT on accommodation provided to drivers, domestic workers and watchmen is now gone.

The biggest change is the introduction of full demolition and rebuild complete projects, where homeowners intending to make big changes in their property can recover a large proportion of their tax costs.

Financial Benefits for Homeowners

With its expanded scheme, UAE nationals will benefit from significant cost reduction in construction. As the average estimated refund for each claim was AED 25,000, families could plough these funds into interior decorating, home furnishings or other improvements.

The program is estimated to save Emirati citizens AED 200 million at a national level, and contribute to making residential development viable and encouraging compatriots to invest in better quality family homes.

Who Can Benefit?

VAT refund applies to UAE nationals who are building new rental houses for personal use only. The new scheme will allow for reimbursement for construction works and approved additions provided they are on the same residential plot of land.

It is crucial for homeowners to keep extensive invoices and supporting paperwork on hand during the construction process to help them apply for a refund more smoothly when the job is complete.

FAQs

Who can benefit from the increased VAT refund scheme?

The VAT refund extension applies to UAE citizens who develop new residential housing to build for their own use, and the VAT refund policy guidelines of the FTA are adopted.

What are the savings that can be expected for homeowners?

The average applicant is expected to get around AED 25,000 in refunds, but depends on the exempt construction costs in every case.

What is your best estimate for the sum of all approved claims?

The Federal Tax Authority believes that more than AED 1 billion will be submitted for VAT refunds within the expanded initiative.