Introduction
UAE has many farmhouses and farmlands used for different commercial and non-commercial purposes. Owners rent these properties for vacations, staycations, or business. Investors in the UAE always want to know the effect of VAT before buying or leasing a farmhouse or farmland. Before making decisions, owners must look at all rules, including VAT. Mubarak Al Ketbi (MAK) Auditing helps clients understand these rules and stay compliant.
VAT Treatment for Residential Farmhouses
The FTA explained that if a farmhouse acts as a regular residential building, it follows the same VAT treatment as a home. For this, a person must use the farmhouse as their main residence.
- First supply (sale or lease) within 3 years after construction is zero-rated.
- Any supply after the first supply is exempt from VAT.
- Owners don’t need to charge VAT on further supplies.
If you plan to live in your farmhouse as your main residence, you can save on VAT when selling or leasing it the first time.
Types of Farmhouses and Their VAT Impact
Not all farmhouses count as residential buildings. Some buildings on farmland are not fixed to the ground or can be moved easily. Here are some situations where farmhouses are not treated as residential:
- Buildings that can be removed without damage.
- Any building used for commercial purposes, like hotels, motels, bed & breakfast, or hospitals.
- Service apartments with extra services for guests.
- Any building made illegally on farmland.
In these cases, the supply of the building is taxable at the standard VAT rate. You must check the type of building and how you use it.
VAT on Bare Land vs. Farmland
If you supply bare land (no building, no construction, or ongoing work), it’s exempt from VAT. Farmland with no building or construction is treated like bare land, so any supply is VAT exempt.
To decide if your property is bare land, you must look at:
- Current use of the land
- Presence of buildings or construction
- Any ongoing development
If the land is just a field, supply is exempt from VAT. If there’s any structure or construction, rules change.
Commercial vs. Non-Commercial Farmland
Some farmland isn’t bare because it has buildings or construction. If you use land for business—like growing crops or raising livestock for sale—it’s commercial farmland.
- Supply of commercial farmland is taxable at standard rate.
- Even non-commercial farmland, if it has buildings or is under construction, is treated the same for VAT—taxable at standard rate.
- Only non-commercial farmland with no buildings or activity is VAT exempt.
Always check your land’s status before making a deal.
How to Apply VAT to Multiple Farm Supplies
Sometimes, a farm has different buildings and uses. If you supply a whole farm, you must figure out its main purpose:
- If you use the farm mainly as your principal home, and activities are for personal enjoyment, then the supply is treated as residential (exempt from VAT after first supply).
- If you use the farm only for weekends or as a guesthouse, it’s commercial—supply is taxable at standard rate.
Every owner must know the main use of the property. Mubarak Al Ketbi (MAK) Auditing helps clients analyze their property use for the right VAT treatment.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing gives expert VAT guidance for all property owners in UAE. We:
- Advise you on residential, commercial, or mixed-use farm supplies.
- Analyze your farm’s status for VAT.
- Help you file correct VAT returns.
- Train your staff in VAT compliance.
- Give regular updates about changing VAT rules.
When it comes to farm VAT, we help you not miss the boat on savings or compliance.
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp: +971 50 276 2132
