Commercial Rent VAT in the UAE: Rate, Registration & Recovery

Commercial rent in the UAE carries 5% VAT. See when landlords must register above AED 375,000, what tenants can recover and how deposits and charges work.

12 November 2026Qawi7 min read

Key takeaways

Commercial rent in the UAE is subject to VAT at the standard rate of 5% (Ministry of Finance, as of 12 November 2026), so a landlord who rents out an office, shop or warehouse adds VAT to the rent.
A commercial landlord has to register for VAT once taxable supplies and imports pass AED 375,000 over 12 months, and can register voluntarily from AED 187,500 (Ministry of Finance, as of 12 November 2026).
Residential rent follows a different rule: Cabinet Decision No. 52 of 2017 exempts leases of residential buildings with a contract term of more than six months, and hotels and serviced apartments fall outside that exemption.
A VAT-registered tenant that uses commercial premises for taxable business can generally recover the 5% through its own VAT return, while a tenant that isn't registered, or that makes only exempt supplies, can't.
A landlord who charges VAT on commercial rent can recover VAT on the expenses of that renting business, according to the Government's guidance on the VAT treatment of properties.

Is commercial rent subject to VAT in the UAE?

Yes. Commercial property is taxable at the standard 5% rate, so the landlord adds VAT on top of the rent and the tenant pays it. The Ministry of Finance states that commercial property is taxable at the standard rate, and the Government's property guidance says the owner charges 5% VAT on commercial rent.

Place of supply is not a complication here. The Government's guidance says the place of supply for property located in the UAE is always the UAE, so leasing UAE property is treated as a supply in the UAE and the reverse charge doesn't apply, even if the landlord or tenant is overseas.

Say a shop is let at AED 200,000 a year before VAT (an illustration, not a market rent):

Item	Amount
Annual rent before VAT	AED 200,000
VAT at 5%	AED 10,000
Total the tenant pays	AED 210,000

Cabinet Decision No. 100 of 2024 amended the VAT Executive Regulation (the Ministry of Finance announced it on 5 October 2024). The announcement covers investment funds, virtual assets, in-kind donations between charities and government entities, and deregistration powers; it doesn't mention property leases, and the Ministry of Finance page still shows commercial property at the standard rate as of 12 November 2026.

Which property rentals are exempt from VAT instead?

Residential rent is the main exception. Under Article 43 of Cabinet Decision No. 52 of 2017, the supply of a residential building is exempt where the lease term is more than six months, and the term is measured by the contract period, ignoring any option to extend and any right to end the lease early.

Property	VAT treatment	Source
Office, shop, warehouse or other commercial property	Standard rate, 5%	Ministry of Finance; Government property guidance
Residential building leased for more than six months	Exempt	Cabinet Decision No. 52 of 2017, Art. 43
Hotel, hotel apartment or serviced apartment	Outside the definition of a residential building	Cabinet Decision No. 52 of 2017, Art. 37
Residential lease of six months or less	Doesn't meet the wording of Art. 43; confirm treatment with the FTA or a tax agent	Cabinet Decision No. 52 of 2017, Art. 43

Treatment as of 12 November 2026. The Ministry of Finance also notes that the first supply of a newly built residential property within three years of construction is zero-rated, which is a separate rule from ordinary residential leasing.

Does a landlord have to register for VAT on commercial rent?

Yes, once the landlord's taxable supplies and imports exceed AED 375,000 over the previous 12 months. The Government's property guidance tells owners who rent out commercial property to register above that level, and the Ministry of Finance sets voluntary registration at AED 187,500.

The guidance speaks of owners, not companies, so an individual who owns a shop is tested the same way as a company. The rent counts together with the owner's other taxable supplies, which means a trading company that also lets out a unit needs to add the two when it checks the threshold.

The steps for a landlord who has crossed the threshold:

Add up taxable supplies and imports for the last 12 months, including commercial rent.
Apply for VAT registration on EmaraTax, the FTA's portal.
Confirm in the lease whether the stated rent is before or after VAT.
Issue tax invoices to the tenant showing the 5% charge and your Tax Registration Number.
Report the VAT collected on your VAT return, filed on EmaraTax.

If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.

Can a tenant recover the VAT on commercial rent?

A VAT-registered tenant can generally recover the VAT on commercial rent through its own VAT return, provided the premises are used to make taxable supplies. A news report of a 2018 statement by the FTA and Dubai Land Department said a tenant that is a registered taxable person may recover VAT paid during the lease period through its own return.

A tenant that isn't registered has no return to claim on, so the 5% is a cost. A tenant that makes only exempt supplies is in a similar position: Article 55 of the Executive Regulation sets out how input VAT is apportioned when it relates to exempt supplies. Ask the landlord for a tax invoice in your company's name and keep it with the lease, because a claim needs the paperwork behind it.

How are service charges, utilities and deposits treated?

Charges that sit alongside rent usually carry VAT too. The Government's property guidance lists building maintenance, owners' associations and related services, electricity, water, gas and cooling, and real estate agent fees among the services subject to VAT.

Deposits and advance payments need more care. Article 19 of the Executive Regulation says tax is due to the extent of the payment made or stated in the tax invoice, so rent paid in advance brings VAT due on the amount paid. Whether a refundable security deposit counts as payment for a supply depends on its terms, so don't assume it either way without checking with the FTA or a tax agent.

5%: standard VAT rate charged on commercial property rent in the UAE. Source: Ministry of Finance, Value Added Tax page, checked 12 November 2026.

What most guides don't tell you

The lease wording decides who absorbs the 5%. A lease that says only "AED 200,000 per year" leaves room for the landlord to assume VAT is extra and the tenant to assume it's included. Settle it in writing before signing, because the dispute surfaces at the first invoice.
A landlord who isn't registered can't pass on VAT. Charging VAT requires being VAT registered, so a tenant asked to pay "5% VAT" by a landlord with no Tax Registration Number has a problem. Ask for the number first and keep it on file.
Mixed-use buildings and a change of use have long consequences. Article 55 covers apportionment of input VAT between taxable and exempt supplies, and Article 58(1) sets a capital asset adjustment period of 10 consecutive years for buildings. A landlord who switches a building between commercial and residential use should take advice before the switch, not after.
Free zone premises aren't automatically the same. VAT is a federal tax, so the commercial rent rule doesn't change between emirates, but premises inside a designated zone can follow special rules. Check the status of the premises before assuming the standard 5% applies.

Which VAT deadlines apply to your company?

If your company rents out commercial property, or rents premises for its own use, the VAT dates differ from those of a pure trading company. The free UAE compliance calendar is a calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file: get your UAE compliance calendar.

Frequently asked questions

Is residential rent subject to VAT? Generally no: Cabinet Decision No. 52 of 2017 exempts the lease of a residential building where the contract term is more than six months. Hotels, hotel apartments and serviced apartments fall outside the definition of a residential building.

How is VAT applied to real estate sales in the UAE? According to the Ministry of Finance, commercial property is taxable at 5%, residential property is generally exempt, and the first supply of a newly built residential property within three years of construction is zero-rated. Check the specific property and sale date with a tax adviser before you invoice.

Do I charge VAT on deposits and advance payments? Article 19 of the Executive Regulation says tax is due to the extent of the payment made or stated in the tax invoice, so an advance payment of rent brings VAT due on that amount. Whether a refundable security deposit counts depends on its terms, so confirm before you treat it either way.

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

Last checked: 12 November 2026

This is general information, not tax or legal advice for your specific situation.