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Can you claim VAT on building materialsin the UAE?

Last reviewed

Can you recover the VAT?
Depends
VAT charged
5%
Corporate tax
Deductible (capital if an improvement)

Usually recoverable for office fit-out and repairs. Apportioned or blocked for residential and staff housing.

When you can claim the VATand when it's blocked

You can claim

  • Recoverable for fit-out and repairs of commercial premises used for taxable business.

You can't claim

  • Materials for residential property you lease out (an exempt supply) or for staff housing provided free need apportionment or are blocked.
  • Large building projects can fall under the Capital Assets Scheme (assets of AED 5 million or more).

Worked examplesand why they land that way

  1. Recoverable

    Paint and tiles for the office refurbishment

    5%, recoverable, capitalized.

    Materials for your own commercial premises carry 5% that you can recover. A refurbishment usually improves the asset, so it's capitalized and depreciated for corporate tax rather than expensed.

  2. Depends

    Repairs to staff accommodation

    Check the residential and staff-benefit rules.

    The answer turns on who benefits. Housing you give staff for free is a personal benefit, so the VAT is blocked unless the law or the employment contract requires you to provide it. If you rent the units out, that's an exempt supply and the VAT can't be recovered.

What to keepand what to watch

Documents you need

Tax invoice with TRN; project or property reference.

Corporate tax

Deductible (capital if an improvement). Repairs are deductible. Fit-out and improvements are capital: depreciate rather than expense.

GL account: Repairs and maintenance / Fixed assets: leasehold improvements

Common mistakes

Expensing capital fit-out. Not tracking whether the property is commercial or residential.

Questions peopleask about this

Is a fit-out expensed or capitalized?

Repairs are expensed. Fit-out and improvements are capital, so you depreciate them for corporate tax. The VAT is recoverable either way for commercial premises.

Does the Capital Assets Scheme apply?

It can for large building projects, where the asset is worth AED 5 million or more. Talk to your tax advisor before a project that size starts.

What should I keep on file?

The tax invoice with the supplier's TRN, plus a project or property reference that shows which building the materials went into. That matters most when you own both commercial and residential property.

Relatedexpenses

Rules thisanswer relies on

Legal basis: VAT Law Art. 54-55; Exec. Reg. Art. 53; Capital Assets Scheme provisions

Sources

General treatment for VAT-registered UAE mainland businesses making fully taxable supplies. Free zones, partial exemption, government entities, and the facts of a specific purchase can change the answer. This guide isn't tax advice.