VAT Refund for UAE Nationals Building New Residences
 

The Federal Tax Authority has issued an update in June 2026 to the VAT Guide for UAE Nationals building new residences. The same primarily focuses on revising Appendix 1 to align with FTA Decision No. 5 of 2026 (effective 1 January 2026). The revision expands and clarifies the list of eligible expenses, particularly by expressly including certain ancillary, lifestyle, and integrated features, while retaining the existing eligibility principles and exclusions.

We have summarized the overall changes before and after June 2026 for better clarity.

Area of Change	Position prior to June 2026	Position post June 2026	Nexdigm Remarks
Overall coverage of Appendix 1	Listed eligible and non-eligible items based on incorporation into the building	Expanded to include additional expense categories under FTA Decision No. 5 of 2026	Enhances clarity and broadens scope of recoverable VAT
Core construction and professional costs	Building materials, incorporated fixtures, and contractor/professional services eligible	No change	Foundational eligibility framework remains unchanged
Ancillary residential spaces (staff rooms)	Not expressly covered; interpretational uncertainty	Security guard, driver, and maid rooms explicitly eligible	Confirms such spaces form part of residential use
Doors, gates, garage doors, carports	Generally treated as part of building; limited explicit coverage	Smart/electronic doors, gates, garage doors and attached carports explicitly eligible	Removes ambiguity; aligns with modern construction features
Gym and playroom	Not specifically recognized; often treated as non-essential additions	Explicitly included as eligible	Expands interpretation of residential functionality
Landscaping within plot	Eligible in limited situations depending on structural integration	Landscaped agricultural areas within plot explicitly eligible	Extends eligibility to certain external works forming part of residence
Reconstruction/demolition activities	Not expressly addressed; focus on new construction	Demolition and rebuilding explicitly eligible	Significant expansion to include reconstruction scenarios
Smart and security systems	Eligible where demonstrably embedded; interpretational challenges existed	Eligible where fixed and integrated as part of a complete system	Reinforces integration-based eligibility test
Existing eligible items (continued)	Included AC systems, plumbing, flooring, fencing, lifts, solar panels, wiring, etc.	No change	All previously recognized incorporated items remain eligible
Non-eligible items (appliances, furniture, etc.)	Appliances, electronics, loose furniture, and non-fixed items excluded	No change	Distinction between movable and fixed items continues to apply
Underlying eligibility principle	Focus on incorporation into building structure	Retained, with broader inclusion of functionally integrated elements	Indicates shift towards a more practical and inclusive interpretation
Scheme conditions (use, documentation, timelines)	Residential use, valid documentation, and filing timelines required	No change	Compliance requirements remain critical despite expanded scope

 
It is important to note that the method for claiming the refund has not undergone change. The FTA has issued the detailed Guide for said process.