The UAE’s tax rules let some residents claim input tax when they build a home. This rule helps UAE nationals save money if they meet the set conditions. People need to follow all steps closely to make sure they qualify for this refund.
Input Tax Recovery for Home Construction: What It Means
The UAE government allows input VAT recovery on certain building costs. You can claim input tax if you’re a UAE national who holds a Family Book and you build a new residential building. You must follow the guidelines from FTA, which explain what expenses are eligible for an input tax claim.
What Kind of Building Allows a UAE National to Claim Input Tax?
You can’t claim input tax for every building. The law says that only a new residence qualifies for this refund. “Residence” means a building that has the basic things a private home must have. This rule does not cover commercial buildings. You also can’t claim input tax on changes made to an existing home. If you build a new, separate house on the same land as your current home and it fits the residence definition, you can claim input tax for the new house.
Here Are Two Examples:
- Example 1:
A UAE national owns a villa. He builds a recreation room as a separate structure on the villa’s land. The recreation room is not a full residence, so he cannot get a VAT refund for this room. - Example 2:
A UAE national owns a villa. He builds a new house as a separate structure on the same land. The new house is a full residence, so he can claim VAT refund on its construction.
What Expenses Count for Tax Refund When Building a Home?
If you qualify for a refund, you need to check what expenses you can claim.
The eligible expenses for tax refund usually include:
- Cost of building materials used for construction
- Service fees paid to contractors, engineers, and architects
- Charges for permits directly related to construction
- Any fee linked with the building process that’s part of making a new residence
You can’t claim input tax for things that don’t directly help in building the new home. You must keep all your bills and documents ready. The FTA will check these documents before it approves your refund.
Why You Need Proper Tax Accounting for VAT Recovery
Proper tax accounting matters a lot when you apply for a tax refund. You must keep your records accurate and sorted. Good accounting helps you:
- Show proof for all expenses linked to construction
- Avoid mistakes in VAT claims
- Follow UAE tax rules and avoid fines
- Get your refund faster with complete documents
If you use the wrong category for an expense or if your records are not complete, your refund claim could be rejected. Sometimes, people face penalties for not following the tax rules. That’s why you need careful tax accounting with every step of your home project.
Step-by-Step: How to Claim Your Input Tax
You can claim your VAT refund by following these steps:
- Collect all documents, like invoices and receipts for construction.
- Make sure your new home fits the residence definition by FTA.
- Submit your refund application through the FTA’s official portal.
- Attach all supporting documents with your claim.
- Wait for the FTA to review your documents and approve the refund.
- Get the refund if everything checks out.
If you’re unsure at any point, you can talk to experts for help and guidance.
What Expenses Are Not Allowed for Input Tax Claim?
Not every cost is eligible for a tax refund.
You can’t claim input tax for:
- Commercial buildings or any structure not used as a private home
- Extensions, changes, or improvements to an existing completed home
- Costs for furniture, household appliances, or decorations
- Maintenance or repairs on an old home
Make sure you separate all ineligible expenses before you apply for a refund. If you add them, your claim could be delayed or even denied.
How Mubarak Al Ketbi (MAK) Auditing Can Help with VAT on Home Building
When you face the maze of VAT and tax refunds, Mubarak Al Ketbi (MAK) Auditing can lead you out—because every cloud has a silver lining. Their team will review your case, help you prepare documents, and guide you through every tax rule for your home project.
- For more information visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp on this number: +971 50 276 2132
