FAQ: When Must a Real Estate Developer Report a Property Sale in the VAT Return? Off-Plan Payments vs. Unit Handover

CONTEXT

A real estate developer registered in a UAE Free Zone is constructing a mixed-use building comprising residential apartments and commercial premises. Property sales occur in two ways:

• off-plan sales during the construction phase, with payments received through an escrow account;
• post-completion sales, where the unit is handed over to the buyer after construction is finished.

Some works are performed by the developer's own workforce; others are carried out by third-party contractors.

Developers frequently ask: at what point must the sale of a residential apartment (0% VAT) or a commercial unit (5% VAT) be reported in the VAT return — when off-plan payments are received through escrow, or when the unit is physically handed over to the buyer?

The answer depends on the rules governing the date of supply under UAE VAT law, which determine the tax period in which the transaction must be reported.

LEGAL BASIS

• Federal Decree-Law No. 8 of 2017 on Value Added Tax — Article 25 (date of supply of goods)
• Cabinet Decision No. 52 of 2017 on the Executive Regulati...