Claim Back VAT on Your Home Construction – Here’s How

🧾 Overview

The Federal Tax Authority updated its 2026 guide, making refunds faster and fully digital.

UAE Nationals can claim VAT on construction costs—if done correctly.

Mistakes lead to delays or rejection.

✅ Who Can Claim

You are eligible if:

• You are a UAE National
• You are building a new residential property
• The property is for personal or family use
• The home includes basic living facilities:
  • Bedroom
  • Bathroom
  • Kitchen

❌ Who Cannot Claim

You cannot claim VAT refunds for:

• Rental or investment properties
• Commercial buildings
• Hotels or guest houses
• Mixed-use developments

💰 What You Can and Cannot Claim

✔️ Eligible Costs

• Construction services
• Building materials
• Permanent fixtures (built-in items)

✘ Not Eligible

• Furniture and décor
• Movable appliances
• Non-essential landscaping
• Maintenance or repairs
• Luxury additions outside core construction

🔄 Key 2026 Changes (Simplified)

⚠️ TFCC Insights – What Actually Matters

This is where most people go wrong:

• Keep all invoices clean, complete, and VAT-compliant
• Upload documents regularly, not at the end
• Ensure your contractor follows proper invoicing standards
• Most delays happen due to missing or incorrect paperwork
• Plan VAT compliance before construction starts, not after

Doing this late is like trying to fix your foundation after building the house. Technically possible, unnecessarily painful.

🧠 How TFCC Can Help

VAT refunds look simple on paper. In reality, they’re detail-heavy and unforgiving.

At The First Check Consultants (TFCC), we help you:

• Assess eligibility upfront
• Guide contractors on correct invoicing practices
• Organize and manage all documentation
• File your claim accurately
• Handle FTA queries and follow-ups
• Ensure faster approvals with minimal errors

In short, we make sure you actually get your money back instead of chasing it for months.

🚀 Get Your VAT Refund Right the First Time

Don’t leave your refund to chance or last-minute corrections.

👉Speak to an Expert
👉Get Your VAT Refund Reviewed

Author
CA Piyush Papneja
Partner, The First Check Consultants
📧 admin@thefirst-check.com
🌐 www.thefirst-check.com

(Everything you need to know about charging VAT only on profit under the latest FTA guidance)

Read More –

Introduction

Businesses dealing in second-hand goods, antiques, and collectibles often run into a classic VAT headache. If VAT is charged on the full selling price, you end up taxing value that has already been taxed before. Not exactly the definition of fairness.

To fix this, the UAE introduced the Profit Margin Scheme (PMS) — a special arrangement where VAT is applied only on the profit margin instead of the full selling price.

To finally remove the guesswork, the Federal Tax Authority issued VAT Guide VATGPM1 (January 2026) — the first dedicated and detailed guidance on PMS.

Who Should Care About This

This isn’t niche. If you operate in any of these sectors, this guide is basically required reading:

• Used vehicle dealers
• Second-hand electronics resellers
• Antique and collectibles traders
• Luxury watch and jewellery resellers (where eligible)
• Businesses selling assets with blocked input VAT
• VAT advisors and finance teams

What is the Profit Margin Scheme?

Under normal VAT rules:

• VAT is charged on the full selling price

Under PMS:

• VAT is charged only on the profit margin (selling price – purchase price)

That’s the difference between paying tax on reality vs paying tax on your entire turnover like a masochist.

Eligible Goods

The scheme typically applies to goods that were already subject to VAT earlier:

• Second-hand goods suitable for reuse
• Antiques (usually over 50 years old)
• Collectors’ items (coins, stamps, historical items)
• Goods with blocked input VAT recovery under Article 53 (in specific cases)

2026 Guide – Quick Comparison

• Guidance: Earlier unclear → Now detailed PMS guide
• Eligibility: General → Clearly defined
• Purchase Proof: Basic → Strict documentation required
• Non-registered Purchases: Unclear → Self-documentation allowed
• Invoicing: Vague → Mandatory wording required
• VAT Display: Inconsistent → Cannot show VAT separately
• Loss Sales: Not defined → No VAT, no offset allowed
• VAT Returns: Limited clarity → Clearly defined reporting

Key Compliance Risk Areas

Businesses applying PMS need to be unusually disciplined here:

• Evidence that goods were previously subject to VAT
• Proper purchase documentation (especially from individuals)
• Correct PMS-specific invoice wording
• VAT not shown separately on invoices
• Accurate VAT return reporting
• Inventory-level tracking and reconciliation

Miss these, and the authorities won’t politely disagree. They’ll just recalculate everything on full value.

TFCC Insight

The January 2026 guide signals a clear direction from the FTA:

More clarity, but also stricter documentation and governance expectations.

Yes, PMS can significantly reduce VAT liability. But if applied incorrectly, the consequences are… predictable:

• VAT reassessed on full selling price
• Financial penalties
• Scheme disqualification

What Businesses Should Do Now

Before implementing PMS, businesses should:

• Review ERP and invoicing configurations
• Update invoice formats with correct PMS wording
• Strengthen purchase documentation processes
• Maintain detailed stock and margin records
• Align VAT return reporting with new guidance

PMS is one of those rare tax mechanisms that actually benefits businesses. Naturally, it only works if you follow the rules with near-obsessive precision.

How TFCC Can Help

• PMS eligibility assessment
• Invoice and ERP system review
• Documentation and compliance setup
• VAT return alignment and reporting
• Ongoing advisory and audit support

Full Guide Reference – https://tax.gov.ae/Datafolder/Files/Pdf/2026/Guide/Profit%20Margin-Scheme-EN-02-01-2026-re.pdf

Conclusion

The Profit Margin Scheme offers a clear opportunity to reduce VAT liability for eligible businesses. However, it comes with strict documentation and compliance requirements.

With the 2026 guidance from the Federal Tax Authority, expectations are now clearer—leaving little room for error. Businesses should review their processes and ensure proper implementation to avoid penalties and reassessments.

Author
CA Piyush Papneja
Partner, The First Check Consultants
📧 admin@thefirst-check.com
🌐 www.thefirst-check.com

The Cabinet Decision No. 100 of 2025, effective from 29 September 2025, builds upon these prior amendments.  It reflects the UAE’s commitment to creating a transparent, efficient, and globally consistent tax environment, while also ensuring that businesses operate under clear and updated compliance guidelines.

Key aspects of the Decision and applicable conditions:

1. Article 59 & 60 – Tax invoices & Tax Credit Note:

• Elimination of simplified invoices: The concept of simplified invoices has been removed under the e-invoicing framework. Consequently, businesses previously issuing simplified invoices for supplies below AED 10,000 will be required to issue e-invoices.
• Mandatory e-invoicing for zero-rated supplies: All zero-rated transactions, including exports of goods and services to non-UAE businesses, will be subject to e-invoicing requirements.
• Revised requirements for credit notes: Under the e-invoicing framework, credit notes will no longer be required to include the original invoice value, the corrected value, and the difference between the two. Instead, it will be sufficient to disclose the credit note amount along with the applicable VAT.
• Electronically issued invoice storage rules: Earlier provisions governing the storage and authenticity of electronically issued invoices and/or credit notes are no longer applicable under the new e-invoicing framework and are expected to be clarified further in due course.

2. Revised VAT Registration and Deregistration Rules

One of the most important updates revolves around VAT registration and deregistration.

1. Mandatory Registration Threshold: Remains at AED 375,000, but the enforcement mechanisms have been strengthened. Businesses that exceed this threshold must register within 30 days, and the FTA now has the authority to auto-register businesses if they fail to do so.
2. Voluntary Registration Threshold: Set at AED 187,500, allowing startups and small businesses to register early if they expect taxable supplies or expenses to exceed this limit.
3. Authority-Initiated Deregistration: A new clause, Article 14 (bis), empowers the FTA to deregister businesses that no longer meet VAT registration requirements or fail to comply with regulations — a move designed to protect the integrity of the tax system.
4. This emphasizes the importance of maintaining accurate records, filing timely returns, and ensuring continued eligibility under VAT law. Businesses can minimize risks by working with professionals offering VAT services in Dubai, ensuring ongoing compliance and avoiding penalties. 

Key take aways: 

• Operational Readiness: Companies must update billing systems and processes to generate full tax invoices compliant with detailed data requirements.
• E-Invoicing Preparation: The VAT framework amendments integrate closely with the forthcoming mandatory e-Invoicing system (piloted from July 2026). Businesses should prepare to issue structured digital invoices when brought into scope.
• Compliance Risk: Invoices lacking required information will no longer benefit from administrative exceptions — meaning penalties may apply for non-compliance.
• VAT compliance teams need to align internal controls with the updated rules and ensure systems can handle electronic invoice formats and data submission as defined by future e-Invoicing regulations.

Click here to read the official announcement

Key aspects of the Decision and applicable conditions:

1. Article 48, Clause 1 (Reverse Charge) : If the Taxable Person imports Concerned Goods or Concerned Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself, and shall be responsible for accounting for the Due Tax on that Supply and complying with all other Tax obligations arising, with the exception of issuing a Tax Invoice to himself

FCC View: Taxpayers are no longer required to issue self-invoices when importing certain goods or services for business use. This change is intended to simplify compliance and reduce administrative burdens.

2. Article 54 (bis) added:
   1. The Authority shall reject the deduction of the Recoverable Input Tax if it is established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person was aware of this relation upon deducting the Recoverable Input Tax
   2. The Authority may reject the deduction of the Recoverable Input Tax if it is established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person should, based on circumstances of the supply, have been aware of this relation.
   3. For the purposes of applying the provisions of Clause b, the Taxable Person shall be considered to have been required to be aware that the supply was part of a supply or a chain of supplies related to Tax Evasion, if he did not verify the validity and integrity of the supplies he receives before deduction of Input Tax, in accordance with the measures, procedures and conditions determined by the Authority in this regard.

FCC View: FTA have put more responsibilities on the receipt of goods or services to do more due diligence of their suppliers and make sure all the suppliers in the supply chain pays the VAT to authority on time. 

3. Article 74, Clause 3 (Excess Recoverable Tax): If no request is submitted to recover the excess after offsetting, the excess shall be carried forward to subsequent Tax Periods for a period not exceeding (5) five years from the end of the Tax Period in which the excess arose. In the event that no request to recover the excess has been submitted or it was not used to settle any Tax liabilities before the expiry of this period, the right to claim such excess shall lapse and may not be used to settle any Tax liabilities 

FCC View: Businesses are advised to review and ensure that all excess recoverable input tax is claimed or applied against VAT liabilities within the five-year period to prevent the expiration of the right to claim and the potential loss of recoverable VAT. Also, for all the existing cases extension till 31.12.2026 is provided by the authority. 

4. Article 79 (bis) – Statute of Limitation: It should be noted that this Article has been repealed, and any provisions that conflict with the UAE VAT Law are no longer applicable/valid. 

Key take aways: 

1. No need of self invoicing for the import of goods/services imported for business use
2. Refund application should be filed within 5 years from the end of tax period
3. Recipient of goods/services need to do more due diligence of their suppliers, as authority reserves the right reject the VAT input in case part of a chain linked to tax evasion and the taxpayer was aware of this connection when claiming the deduction.

Click here to read the official announcement

Overview of the Reverse Charge Mechanism

The UAE Ministry of Finance has introduced Cabinet Decision No. 153 of 2025, which applies the Reverse Charge Mechanism to the local supply of metal scrap between VAT-registered persons. This decision aims to enhance VAT compliance, reduce administrative burdens, and combat tax fraud in the metal scrap sector.

Key aspects of the Decision and applicable conditions:

Definitions​

1. 1. Scrap Metal: Refers to waste of ferrous or non-ferrous metals that retain commercial value and can be reused after processing. ​
   2. Processing: The conversion of scrap metal into usable materials for manufacturing new products through methods such as repair, recycling, or other approved processes.​

Application of RCM as per Cabinet Decision No. 153:

2. 1. VAT-registered suppliers of metal scrap will not charge VAT on supplies made to VAT-registered customers who intend to resell or process the scrap. They are required to obtain written declarations from the recipients confirming their VAT registration and the purpose of the transaction.
   2. Point A shall not apply if the supply of the Metal Scrap is subject to Value Added Tax at the zero rate in accordance VAT Decree Law Article 45 on Export of Goods
4. Recipient’s obligations:
5. 1. Before the supply date, recipients must provide written declarations to the supplier confirming:
   2. Purpose of purchase: Goods will be used for resale or processing as defined in the Decision.
   3. VAT registration status: Recipient is registered with the Federal Tax Authority (FTA).
   4. Failure to provide these declarations means the reverse charge mechanism does not apply, and the supplier becomes liable for VAT.
7. Supplier’s obligations:
8. 1. Receive and retain the declarations
   2. Verify that the Recipient of the Metal Scrap is a Registrant, in accordance with the means approved by the Authority in that respect
   3. The invoice must contain an explicit statement indicating the application of the reverse charge mechanism.

Key take aways:

• The new framework is designed to streamline VAT compliance for businesses engaged in scrap metal transactions, making it easier to manage tax obligations.
• In summary, the Reverse Charge Mechanism for VAT on metal scrap trading represents a significant regulatory change aimed at improving tax compliance and reducing fraud risks in the UAE’s metal scrap sector. Businesses involved in this trade should prepare for the upcoming changes by ensuring they understand their new responsibilities and maintain proper documentation.

Click here to read the official announcement

Why VAT Registration Is Mandatory in The UAE

VAT registration within the UAE becomes mandatory once an enterprise’s taxable turnover and imports cross the threshold prescribed by way of the Federal Tax Authority. Beyond mandatory thresholds, voluntary VAT registration is often pursued by businesses looking for operational and financial benefits. Yet, the registration journey involves deep monetary assessments; systematize documentation, and regulatory compliance. Without adequate information of UAE tax processes, groups may find the technique of time-consuming and difficult to manage.  Professional VAT registration specialists bring clarity to these requirements. They truly determine your eligibility, put together and confirm documents, submit applications accurately, and liaise with authorities when required.

Companies can avoid unnecessary delays and ensure compliance from the beginning, by choosing experienced professionals.

Why Professional VAT Consultants Are Essential

VAT regulations in the UAE are dynamic and difficult to update. Professional specialist services are extending beyond registration and include VAT return filing, audit help, deregistration and advisory services.

Engaging consultants also lets in business proprietors to focus on core operations rather than navigating technical tax topics. This is particularly vital in competitive markets where operational performance immediately affects boom and profitability.

Trusted VAT Consultants in Dubai for Businesses

Dubai is the economic hub of the UAE, hosting businesses across numerous industries such as real estate, logistics, tourism, and e-commerce. Due to high transaction volumes and complex organizational structures, VAT registration compliance in Dubai regularly calls for specialized understanding.

The First Check Consultants are the best consultants for VAT in Dubai offering complete tailored solutions to the metropolis’s rapid paced commercial enterprise environment. They help with brief VAT registration, proper taxable supplies, and correct VAT return submission. Their deep knowledge of Dubai’s regulatory landscape guarantees that businesses continue to be compliant at the same time as optimizing their tax positions. Whether you are a Mainland Company, free zone entity, or multinational business, professional experts in Dubai offer established and reliable VAT solutions.

Best Consultants for VAT in Abu Dhabi & Ras-Al Khaimah

Abu Dhabi’s economy is driven by massive agencies and capital-intensive industries, including energy, manufacturing, and infrastructure. As a result, VAT compliance in the Emirate involves designated tax planning and unique controlling of high-value and sector-specific transactions. The best consultants for VAT in Abu Dhabi deliver sector-specific knowledge of compliance frameworks. Their expertise guarantees precision, transparency, and adherence to FTA regulations, which makes them valuable partners for groups working in Abu Dhabi with the structured and controlled market.

Ras-Al Khaimah’s (RAK) supporting business environment makes it an attractive choice for growing firms and manufacturers. The best consultants for VAT in Ras-Al-Khaimah specialize in offering hands-on, business-specific guidance; ensuring companies can meet their tax obligations appropriately without disrupting day-to-day operations.

Best Consultants for VAT in UAE: A Nationwide Advantage

While every Emirate has its own business dynamics, VAT regulations are governed at the federal level. The First Check Consultants are the best consultants for VAT in the UAE offering nationwide coverage, ensuring regular and compliant VAT practices throughout multiple locations.

Nationwide VAT consultants offer standardized tactics, centralized reporting, and strategic advisory services. They help the business to manage VAT across branches, ensure accurate inter-emirate transactions, and keep uniform compliance standards.

Choosing the Right VAT Consultant

Selecting the best consultants for VAT in UAE is an essential decision. Businesses shouldn’t forget elements, such as- experience, industry expertise, transparency, and responsiveness. The best consultants develops clear and smooth communication, provide established timelines to their clients, and offer tailor-made solutions in place of regular generic advice.

A proficient VAT consultant performs his duties well and plays an important role by serving as a long-term compliance advisor and guiding the business through regulatory adjustments during various stages of expansion. This professional collaboration not only safeguards compliance with statutory requirements but also supports strategic financial management and sound managerial decision-making.

Final Insight

VAT compliance is not merely a statutory obligation; it is an essential component of accountable and sustainable business operation inside the UAE. Whether you are primarily based in Dubai, Abu Dhabi, Ras-Al Khaimah, or running throughout multiple emirates, professional assistance from The First Check Consultants could be a tremendous distinction. By engaging the best consultants within your business, you can gain quick VAT registration, maintain compliance, and focus confidently on growth.