FTA widens homebuilding VAT relief

UAE nationals building new private homes can claim VAT refunds on a wider range of construction-related expenses under a Federal Tax Authority initiative that broadens relief for citizens at a time of elevated residential building costs.

The initiative, now active, applies to eligible refund claims submitted on or after 1 January 2026 and is expected to lift the value of approved homebuilding VAT refunds above AED1 billion this year, compared with about AED754 million in 2025. The expansion is linked to the UAE’s Year of Family and is designed to reduce the cost burden on citizens constructing homes for their own use or for their immediate families.

The new scope allows claims for additional items that form part of the residence, including fixtures and fittings, provided they are incorporated into the property and are not intended for commercial, rental or investment use. The additional categories include staff quarters for watchmen, drivers and domestic workers, home gyms, games rooms, integrated security systems and smart home systems, along with built-in components.

Abdulaziz Al Mulla, Director General of the FTA, said the measure reflected national efforts to support social stability and improve services for citizens. He said the initiative established clear mechanisms to facilitate VAT refunds for new home construction while maintaining transparency and compliance requirements.

The financial impact for individual applicants could be significant. Wider eligibility is expected to generate average savings of about AED25,000 per claim, depending on the scale and composition of the project. The benefit comes on top of the existing framework that permits UAE nationals to recover VAT incurred on qualifying goods and services used in building a new residence.

The scheme is available only to a natural person who is a UAE national. Applicants must provide supporting identification and family documentation and must show that the property is a new private residence occupied by the applicant or the applicant’s family. The residence must contain basic living facilities such as sleeping quarters, washrooms and cooking areas. Properties built for leasing, resale, business activity or mixed commercial use remain outside the purpose of the relief.

The FTA’s digital refund platform has been updated to display the categories of eligible expenses approved under the initiative. Applications can be submitted through EmaraTax, the EmaraTax app and the Maskan app. The authority’s service card lists the Maskan submission time at about three minutes and EmaraTax at about 15 minutes for the first phase, with applications processed once all required documents are received.

Applicants are required to submit documents including Emirates ID details, family data or family book information, the property completion or occupancy certificate, an IBAN letter, approved architectural plans, the first building permit, construction and consultancy contracts, quantity tables, full tax invoices and proof of payment. The authority may request further documents during verification. The service is free, and completed applications are expected to be processed within 25 working days after all requirements are met.

The application deadline remains a key compliance point. Refund requests must generally be filed within 12 months from the date of completion of the newly built residence. A separate claim may be made for retention payments, subject to the applicable deadline and documentation standards. Applicants who hold an expense certificate from Emirates Development Bank may benefit from an expedited procedure.

The expansion follows a broader overhaul of guidance for the homebuilding refund system earlier this year. The updated framework clarified the distinction between expenses incorporated into the residence and personal or lifestyle items that do not qualify. Construction materials, contractor services and built-in systems may be eligible when they become part of the building, while furniture, standalone appliances, landscaping, swimming pools and other non-structural items generally remain excluded.

The measure also strengthens the role of digital compliance in the refund process. Maskan enables citizens to record tax invoices during construction, generate barcodes for suppliers to link invoices to the applicant’s account, and view an estimated refund based on recorded costs. This is intended to reduce errors, improve invoice traceability and help applicants avoid disputes over eligibility.

The homebuilding refund programme has grown steadily since VAT was introduced in 2018. By June 2025, about 38,000 applications had been approved, with refunds worth AED3.2 billion. That compared with about 31,000 approved applications worth AED2.54 billion a year earlier. Between June 2024 and June 2025, more than 7,000 additional applications were approved, with refunds totalling AED653.1 million.