A UAE VAT-registered landlord leases a bare plot of land, with no partial or completed buildings and no civil engineering works on it, to a tenant for commercial storage use, with no separate arrangement for financial intermediation involved. Under Article 46 of Federal Decree-Law No. 8 of 2017, how is this supply of bare land treated for VAT purposes?
- Zero-rated, on the same basis as the first supply of a new residential building within three years of its completion
- Standard-rated at 5%, because only supplies of buildings, not undeveloped land, ever qualify for special VAT treatment
- Exempt from VAT, since bare land free of any partial or completed buildings and civil engineering works falls within the Article 46 exempt supplies list, alongside residential buildings other than qualifying first supplies, local passenger transport, and specified financial services
- Out of scope of VAT entirely, because land transactions of any kind are excluded from the scope of Federal Decree-Law No. 8 of 2017
Why C? And why not the others?
Correct answer: C. Exempt from VAT, since bare land free of any partial or completed buildings and civil engineering works falls within the Article 46 exempt supplies list, alongside residential buildings other than qualifying first supplies, local passenger transport, and specified financial services
Article 46 lists bare land, meaning land with no partial or completed buildings or civil engineering works on it, as an exempt supply, alongside residential buildings other than qualifying first supplies, local passenger transport, and financial services provided without an explicit fee; an exempt supply is outside the standard-rated regime and does not entitle the supplier to recover related input tax. The option applying zero-rating is wrong because zero-rating for a new residential building's first supply within three years is a distinct, separately defined category from the ordinary exemption that applies to bare land. The option applying the standard 5% rate is wrong because Article 46 specifically carves bare land out of standard-rating by placing it on the exempt supplies list. The option treating the transaction as entirely out of scope is wrong because an exempt supply is still a supply within the scope of VAT Law, just one taxed at no rate with no input tax recovery, which is a different legal position from a transaction that never falls within the scope of the law at all.
Source: UAE Federal Decree-Law No. 8 of 2017, Article 46 (Exempt Supplies)