Watch out for indirect VAT costs on property deals

Watch out for indirect VAT costs on property deals


With the value added tax (VAT) kicking in on January 1, 2018, end-users in Dubai are confused whether to pre-pone their property purchase decision or to continue paying rents and wait for sales prices to bottom out.


As per the VAT regulations, developers enjoy a zero rate on all residential sales within three years of completion of a project. Any home sale done after those three years will come under the five per cent VAT levy.


However, residents need to watch out for the indirect costs arising from property transactions. Market experts call for caution and remind buyers that there were similar concerns when the Dubai Land Department doubled transfer fees on property transactions from two per cent to four per cent in 2013. Such short-term blips are unlikely to affect buying behaviour.


With attractive property prices and generous payment plans from developers, Dubai appears to be on course for increasing end-user ownership levels and that trend is likely to continue, regardless of the VAT levy. Meanwhile, for those sitting on the fence waiting for prices to bottom out, it will be wise to defer your decision no longer.


Some experts believe a turnaround is on the horizon, with green shoots appearing in certain communities such as the Palm Jumeirah and Jumeirah Village Circle since the beginning of the year.

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