Selling a commercial property in the UAE is rarely straightforward—especially when multiple owners are involved. Whether it’s family-owned real estate, investor partnerships, or business co-ownership, the question that confuses everyone is:
“Who actually pays VAT?”
Since commercial property transactions in the UAE fall under standard-rated VAT, a misunderstanding or wrong assumption can lead to penalties, financial disputes, or delays in transferring ownership.
In this article, we break down exactly how VAT works for jointly owned commercial properties, who pays what, how liability is shared, and how to avoid costly compliance mistakes. If you’re planning a sale, restructuring ownership, or preparing documentation, expert support from VAT consultants in Dubai like DKK can help ensure a smooth and fully compliant process.
Why VAT Applies to Commercial Property in the First Place
Under UAE VAT law, all commercial property sales or leases are subject to 5% VAT—unless they qualify as a transfer of a going concern (TOGC), which is a different scenario entirely.l
For jointly owned properties, VAT liability doesn’t disappear. Instead, it becomes more complex because:
- There may be multiple sellers
- Each owner may have different VAT registration statuses
- Not all owners may agree on how VAT should be handled
- Documentation may not clearly state ownership shares
- One owner may be responsible for the sale negotiations while others remain passive
This is where many transactions go wrong—and where VAT consultants in UAE usually step in to fix the mess.
How UAE VAT Law Treats Joint Ownership for Commercial Property
To understand who pays VAT, you must first understand how the FTA views jointly owned assets.
1. All Co-Owners Are Treated as Separate “Persons” Under VAT Law
Each owner is considered a separate taxable person. That means:
- They are individually liable for their share of the supply.
- Each owner may need to charge VAT according to their ownership percentage.
- If one owner is not VAT registered, it can impact the entire transaction.
This is the first major mistake owners make—assuming one owner can charge and remit VAT for everyone. The FTA does NOT always allow this.
2. VAT Registration Status of Owners Determines VAT Obligations
Here’s how it plays out:
If all owners are VAT registered:
Each owner must:
- Charge VAT on their portion
- Issue a tax invoice for their share
- Report the sale in their VAT return
If some owners are VAT registered, and others are not:
Two scenarios apply:
- Registered owners must charge VAT on their share
- Non-registered owners cannot charge VAT
- The buyer typically demands that VAT be charged uniformly
- A joint sale structure or agency arrangement may be required
This is usually where property deals get delayed because the structure isn’t prepared in advance.
To avoid this, buyers and sellers often engage DKK’s VAT Services, which include reviewing VAT registration statuses and preparing compliant documentation before negotiations begin.
3. VAT Liability Is Based on Ownership Share, Not Agreement Convenience
If an owner holds:
- 50% share → They are responsible for 50% of the VAT
- 30% share → They are responsible for 30% of the VAT
- 10% share → They pay VAT only on that 10%
Unless legally restructured, liability cannot simply be shifted to one party.
Some owners assume the lead owner will “handle the VAT,” but unless there is a proper agency agreement reviewed by a specialist, the FTA can reject this and issue penalties.
Who Pays VAT When Selling a Jointly Owned Commercial Property?
Here’s the clear answer:
1. VAT is paid by the Buyer, BUT…
The buyer pays VAT on top of the property price, but the sellers (co-owners) must remit it correctly to the FTA.
So while money comes from the buyer, the legal responsibility lies with each owner separately.
2. Each Co-Owner Must Issue a Tax Invoice
Unless an agency agreement exists, each owner must issue their own tax invoice based on:
- Their share of ownership
- Their VAT registration status
If the transaction is handled through a single “lead owner,” the arrangement must be drafted correctly to avoid compliance issues.
Most sellers use DKK’s Corporate Tax & VAT Advisory team to structure this correctly and avoid FTA rejections.
3. If an Owner Is Not VAT Registered, the Sale May Be Delayed
The FTA requires compliance from all owners.
If one owner is unregistered and their turnover requires VAT registration, they may need to register before the transaction can proceed—causing delays.
This is why many investors consult DKK before listing a property, ensuring:
- Proper VAT registration
- Documentation readiness
- Ownership structure clarity
Common Mistakes Joint Owners Make (And How to Avoid Them)
Mistake 1: Assuming VAT is handled by “one owner”
Without an agency agreement reviewed by a tax expert, this can lead to penalties.
Mistake 2: Selling without checking VAT registration status
This often leads to:
- Filing delays
- FTA inquiries
- Stalled property transfers
Mistake 3: Incorrectly issuing tax invoices
Improper invoicing results in:
- Buyer disputes
- FTA rejection
- Additional fines
Mistake 4: Not consulting professionals early
Property sales involve valuation, transfer fees, and VAT liability.
Engaging a specialist early reduces financial and legal risks.
To avoid these, many property investors rely on DKK’s VAT consultants in Dubai, who ensure full compliance with UAE laws.
How DKK Helps Joint Owners Navigate VAT in Property Deals
DKK supports sellers through:
- VAT registration for non-registered co-owners
- Preparing agency agreements for unified VAT handling
- Verifying ownership structures
- Preparing correct tax invoices
- Filing VAT returns reflecting the sale
- Ensuring compliance for complex ownership situations
If you are planning to Setup Company in UAE or restructure ownership before a sale, DKK can also support your setup and advisory needs.
Final Thoughts:
VAT becomes tricky only when ownership structures aren’t properly documented or when sellers assume the rules are the same as single-owner sales. With the right guidance and early preparation, property transfers can happen quickly, smoothly, and fully compliant with UAE VAT law.
If you’re planning a commercial property sale, considering restructuring, or want to avoid VAT penalties, DKK’s VAT services in Dubai offer expert, end-to-end support.