Host
Nice to see Ludmila Yamalova once again. Welcome!
Ludmila Yamalova
Good to be here, thank you.
Host
It’s great to have you here. We’ve got some questions coming in for you. If you have a question for Ludmila, this is a free and open legal hour, focusing on property and general legal questions. We’d prefer to keep HR and job-related questions for tomorrow. You’ll be back for Career Connect, won’t you?
Ludmila Yamalova
Indeed I am. You just can’t get rid of me!
Host
For better or for worse. I don’t know why I left that hanging in the air for a moment. That was too much of a pause! Should we make you a little more comfortable on that sofa? Maybe a basket to stay here until tomorrow?
Ludmila Yamalova
I think you could do better.
Host
Do you have an option? Believe me, you do! It’ll be fine. Ludmila will be here tomorrow with David Mackenzie from Mackenzie Jones. For now, we’ll keep the HR topics to one side and focus on general legal queries. Legal questions today—I’ve yet to see you stumped.
Ludmila Yamalova
Not completely!
Host
Let’s kick things off. It seems like every week you come in with an update on VAT. You mentioned there’s some new information today?
Ludmila Yamalova
Yes, indeed. This update comes from an event held by the Ministry of Finance on March 21st, where they provided more guidelines on what the VAT regime will look like. However, I want to clarify that these are still just guidelines at this stage. The law itself hasn’t been introduced yet. According to the Ministry, the VAT law will be passed this summer, followed by the issuance of regulations and bylaws.
For now, we’re commenting on updates from the Ministry and industry experts. Here’s what we know:
- Certain industries, like healthcare and education, will be subject to a 0% tax rate, not to be confused with being exempt. The distinction between “exempt” and “0% tax” is technical but important. If listeners want more detail, I’d be happy to explain further.
- A list of medicines and medical equipment will also fall under the 0% tax rate, though the specifics of this list haven’t been released yet.
Host
What about real estate? That’s always a hot topic during these sessions.
Ludmila Yamalova
Yes, real estate is especially relevant here. The Ministry clarified that:
- Commercial property (both sales and leases) will be subject to the standard 5% VAT rate. For example, if you rent an office, you’ll pay an additional 5% VAT on your annual rent. The landlord will collect this and remit it to the government.
- Residential property, however, will not be subject to VAT—except for brand-new properties being sold for the first time. In such cases, the 5% VAT applies because it’s considered an added value to the economy.
Host
So, if someone buys a new property, they’ll pay VAT?
Ludmila Yamalova
Exactly. For instance, if you purchase a new residential property, you’ll pay the 5% VAT. However, for rental or resale of existing residential properties, VAT will not apply.
Host
What if someone bought a property years ago, but it hasn’t been delivered yet? Would VAT apply?
Ludmila Yamalova
That’s a great question. While we don’t have complete clarity, past trends suggest that delayed properties will likely still be subject to VAT upon delivery. This would be similar to how delayed properties faced the higher 4% registration fee after it was introduced, even if purchased off-plan before the fee increase.
Host
It seems a bit harsh if the delay wasn’t the buyer’s fault.
Ludmila Yamalova
It does, but many agreements include a clause stating that any new taxes or government fees will be the investor’s responsibility, even if they’re introduced later.
Host
Anything else worth noting?
Ludmila Yamalova
Yes, here are a few more points:
- Life insurance will be exempt, but non-life insurance (like car insurance) will be subject to VAT.
- Health insurance remains unclear. It may fall under healthcare (0% VAT) or non-life insurance (standard VAT).
- Investment in gold, silver, and platinum will be at a 0% rate.
- Local transport (taxis, buses, trains) will be exempt.
- VAT’s applicability to free zone companies is still under discussion. Free zones have historically been tax-free, but that could change.
- Tourist refund schemes (like in Europe) are under consideration but not confirmed yet.
Host
Plenty to unpack there. Thank you for the updates, Ludmila! If you have legal questions, text us on 4001 or call 423-1010. This is Drive Live on Dubai Eye 103.8.