Latest Property News

December 18 2017, 19:15

All you need to know about registering for VAT?

Dubai: According to the executive regulations on value added tax (VAT) published last week, the mandatory registration threshold is Dh375,000.

This means that anyone with a turnover of Dh375,000 or more is required to register their business for VAT, the Federal Tax Authority (FTA) and Ministry of Finance (MoF) said in the recently release regulations.

The voluntary registration threshold is Dh187,500, with companies of that size or above able to register for VAT too.
The failure of a taxable person or business to submit a registration application within the time frame specified in the tax law is liable for a Dh20,000 fine.

Also according to the executive regulations, companies are able to register as a tax group.

Through this mechanism, more than one company can register for VAT as a group, under a single common control, according to Dubai-based Jitendra Consulting Group. They say that the main benefit of group registration is to simplify the procedures and save costs through consolidated tax returns and a single VAT registration.

The group’s tax returns and payments are carried out by the member who acts as a representative of the group, the FTA has stated. All the members are jointly liable, however.

VAT rules VAT rules

VAT rules

 

6 Dec 2017

UAE’s Federal Tax Authority announces full VAT supplies list

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax).

These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT in education

UAE vat in all sectors

 

6 Dec 2017

Can you buy a home with Dh10,000 salary in Dubai?

There is a property for every income bracket in Dubai. The lower sales prices and attractive payment plans offered by developers in Dubai are resulting in more first-time home buyers hopping on the property bandwagon. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.

Even someone with a salary of Dh10,000 can climb onto the property ladder today, provided they can arrange for the up-front payment and registration charges.

home buying plan

“There are enough properties available to cater across a wide range of salary brackets. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity,” says Lynnette Abad, partner and head of Property Monitor/Cavendish Maxwell.

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000.

qouate

“The average one-bedroom apartment in new residential areas such as Dubai Silicon Oasis, Liwan, etc., is worth about Dh600,000 with a down payment of Dh150,000 and Dh30,000 in registration expenses. The buyer has to pay about Dh2,200 a month. This is easily achievable for most people earning Dh15000+ a month. This is much less than their rent,” suggests Sanjay Chimnani, managing director, Raine & Horne Dubai.

This year, the top areas for affordable properties to one with a monthly salary of Dh10,000 are (in order) International City, Jumeirah Village Circle (JVC), Al Furjan and Dubai South, estimates Property Monitor, a real estate intelligence platform.

For someone with a monthly salary of Dh15,000, the top areas with affordable properties are Dubai South, JVC, Business Bay and Dubai Sports City, the consultancy adds.

However, if you are looking to buy a villa or a townhouse, it would require a monthly salary of Dh25,000. “It will fetch you a townhouse in master-planned communities such as Town Square and Reem, Mira. Some of the other top areas in this salary bracket are Dubai Marina, Business Bay and The Lagoons,” informs Abad.

The challenge for most buyers is to arrange for the down payment plus registration costs of about 30 per cent. “If this was to be reduced to 15 per cent, we would see an even greater shift to ownership in this market,” suggests Chimnani.

However, the moot question is whether a person earning Dh10,000 a month is eligible for a mortgage. Provided the customer does not have any major loans (personal, credit card and auto), s/he would be eligible for a house loan of up to 25 years, subject to age criteria which restricts payments to the age of 65.

“People earning Dh10,000 and above can apply for a mortgage. The minimum salary requirement for a mortgage is Dh10,000. However, there are only a few banks who do mortgages for clients with Dh10,000 income and, therefore, options for these clients are limited. Majority of the banks require a minimum salary of Dh15,000 and above,” says Carol Monis, head of mortgages, MortgageMe.ae, a group of mortgage brokers in Dubai.

She adds that “most of our mortgage clients are end-users who fall into an income bracket of Dh20,000 to Dh25,000”.

Dhiren Gupta, managing director, 4C Mortgage Consultancy, adds in the same vein that the average income group buying property in Dubai is around Dh25,000 to Dh35,000 and they are primarily buying mid-priced property worth of Dh1.5 million to Dh2 million.

“With such income, they can easily qualify for a loan, barring they do not have pre-existing liabilities and age limitation is not a barrier. Moreover, banks are more comfortable to funding such profiles wherein the property will be utilised for self-use,” concludes Gupta.

3 Dec 2017

Sheikh Mohammed signs VAT Executive Regulation

The Ministry of Finance, MoF, Monday announced that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT.

The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Commenting on the milestone, Younis Haji Al Khoori, Undersecretary of MoF, said, “Today’s signing of the Executive Regulation by the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, marks a new milestone in the application of an efficient taxation system in line with best international standards with the ultimate objective of improving performance of primary sectors and enhancing social welfare.”

The first title of the Regulation includes the definitions of terms used, while the second title deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

The third title of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration.

Meanwhile, the fourth title looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, title five discusses profit margins and explains how to calculate VAT based on profit margins, while title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from value added tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

The eighth title of the Regulation then addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In title nine, the Executive Regulation address Designated Zones in article (51), while title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. The following titles 11 includes article (55) on apportioning input tax and article (56) on adjusting input tax after recovery, whereas title 12 addresses the capital asset scheme in article (57) and adjustments within the capital asset scheme in article (58).

Title 13 of the Regulation includes article (59) on tax invoices, article (60) on tax credit notes and article (61) on fractions of the fils. Then in title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before title 15 goes into recovery of excess tax in article (65). Adding to that, title 16 tackles recovery in other cases and includes article (66) on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

The 17th title includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article (72) on keeping records of supplies made. Meanwhile, the 18th and final titles discusses closing provisions.

28 Nov 2017

Real estate risk allocation and insurance tips for Dubai property investors

As an owner-occupier, your primary risk would be damage or destruction to your real estate asset. As such your insurance will likely be for a lump sum amount or full replacement or reinstatement of the asset. Owner-occupiers may also insure for business interruption to cover them for lost income when the premises becomes unusable due to damage. This may be important, for example, where the owner has a mortgage and would have difficulty in meeting the repayments.

An owner would generally take out insurance for third-party risks: for example, where a visitor suffers an injury caused by or occurring on the real estate asset. In transferring ownership of a real estate asset, the buyer and seller will need to establish a clear date for the risk of damage or destruction of the real estate asset to pass. The logical time for the passing of this risk is the date the title is transferred. Generally the seller will cancel the insurance on this date and the buyer will implement its own insurance. There may also need to be a clear position in the sale-and-purchase contract as to what may happen should damage occur between the date of contract and the date of title transfer.

Where a real estate asset is tenanted, the lease contract may expressly address the allocation of risk between the landlord and the tenant and require the parties to obtain insurance.

It is not possible to map out all of the possible variations in such arrangements, however, the following represents a fairly typical allocation of risk and insurance in a retail/office unit context.

Fit-out period
The landlord will generally require the tenant to have or procure contractors all risk insurance as well as worker’s compensation insurance. The landlord will generally require that the landlord is named co-insured and specify the level of cover the tenant must obtain or procure.

Typically the insurance undertaken during the fit-out period will be obtained by the contractor completing the fit-out. The tenant will need to ensure that this insurance is obtained and contains the relevant covenants sought by the landlord under the lease agreement.

Damage and destruction of the building
The landlord would normally obtain all risk building insurance but may require the tenant to insure for damage arising out of the tenant’s or occupiers’ negligence. This could result in double insurance and an alternative approach would be for the tenant to be named as a beneficiary of the landlord’s insurance. This is, however, not the practice in the region.

Landlords will typically exclude liability for any other types of losses sustained by the tenant — for example, economic losses when the tenant is unable to operate from the premises. Were the landlord to face a claim by the tenant in these circumstances, it may be that the landlord’s third-party liability insurance provides a measure of protection to the landlord. As the landlord will exclude liability for the same, the tenant may wish to obtain insurance for business interruption.

As the landlord will be required to cease charging rent for the period the premises cannot be occupied, the landlord may wish to obtain loss of income insurance.

It is common in the context of a commercial office or retail unit lease that the tenant would meet the landlord’s insurance costs as part of the service charges charged to the tenant.

Tenant contents damage
The landlord may specifically require the tenant to insure the tenant’s contents, fixtures and fittings and to name the landlord as co-insured and/or require the insurer to provide a waiver of its right to sue the landlord in any case where the landlord’s negligence causes the damage.

Third-party injury
Third-party injury claims are civil wrongs and accordingly the party claiming damage or injury does not need to establish a relationship in contract with the party causing the harm. Generally, such claims will arise due to the party in control of the area not taking due care to ensure that areas are kept safe.

Accordingly a landlord may wish to insure for any injuries that may occur to third parties in common areas of a building. As the tenant may also exercise control over their premises, the tenant should also take out insurance for such claims.

Other third-party risks
Other third-party risks arise in multi-tenanted buildings in that if a tenant damages the building, this may cause losses to other tenants. The landlord can seek to exclude liability for such claims in the contract with each tenant, but would very likely also cover such risks through their own third-party policies.

As a tenant will have no ability to mitigate the possibility of claims from other tenants in contract, the tenant would need to obtain its own third-party policy to cover such risks.

Developers, investors
Throughout the construction of a project, the contractors will undertake the necessary insurances. As the developer will be paying progress payments throughout the construction, it is in the developer’s interest to ensure that this insurance is in place and that the developer is also co-insured under the contractor’s policy. It is also important to specify clearly under the construction contract when the developer shall be required to accept risk for the property following completion of construction and, therefore, should obtain its own insurance.

If the project involves off-plan sales, then, once the development is completed, the developer will start handing over the units to the investors. Generally, in the case of jointly owned (strata) property, insuring the building, including the usual fitting and fixtures in the units, would be the responsibility of the owners’ association (OA). In cases where there is not a legally established OA, then it may be possible for the developer to obtain a policy that nonetheless recognises the interests of investors as beneficiaries of the policy.

The developer or the OA will need to consider the type of policies they obtain. Generally speaking, such insurance will cover, and may be required to cover by law, full replacement and reinstatement, third-party liabilities and could cover loss of income or alternative accommodation costs.

Investors would typically insure their own contents and improvements. Investors may also wish to obtain loss of rent insurance or insurance covering the cost of alternative accommodation if this is not taken out by the developer or OA.

Summary
This is a general discussion of the risks in real estate and how they may be addressed in contract and through appropriate insurance. As each property and transaction is different, the risks and insurance solutions may differ so it is important that each transaction is assessed on a case-by-case basis. Accordingly, this article should not be treated as advice as to what is required in any particular set of circumstances.

Reporting by Jeremy Scott and Justin Carroll

Jeremy Scott is partner, real estate, and Justin Carroll is senior associate, insurance, at Al Tamimi & Company. The views expressed here are their own.

29 Nov 2017

Not renewing tenancy contract in Dubai? 3 months notice a must

I have been staying in a rented apartment for around last 12 months and do not want to renew the tenancy for another year. I have notified the landlord by giving one month notice of my intention but the landlord insists a notice period of three months. Further, the landlord is asking me to paint the apartment. Surely that comes under wear and tear of living in a rented apartment? What does the law say exactly as I have been reading contradictory reports?

Pursuant to your questions, we assume that the rented apartment where you are staying is situated in the Emirate of Dubai. All tenancy contracts in the emirate fall under the ambit of the Law no. 26 of 2007, Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai. Subsequently some provisions of the said law have been amended by Law No. 33 of 2008.

Article 14 of the law states: “Where either of the two parties to the lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than ninety days before the date on which the lease contract expires, unless otherwise agreed by the parties.”

Moreover, Article 14 of amendment states: “Unless otherwise agreed by the parties, if either party to the Tenancy Contract wishes to amend any of its terms in accordance with Article 13 of this law, that party must notify the other party of same no less than ninety days prior to the date on which the tenancy contract expires.”

In the event your tenancy contract states that you need to provide a three months of notice period not to renew the tenancy contract, then Article 14 of Law No. 33 of 2008 should be applicable.

You are bound to return the apartment to the landlord in the same condition as provided by the landlord at the time of renting it to you, other than normal wear and tear. This is in accordance with Article 21 of Law No. 26 of 2006 regulating the Relationship between Landlords and Tenants in the Emirate of Dubai, which states: “Upon the expiry of the term of the Lease Contract, the tenant must surrender possession of the real property to the landlord in the same condition in which the tenant received it at the time of entering into the lease contract except for ordinary wear and tear or for damage due to reasons beyond the tenant’s control. In the event of a dispute between the two parties, the matter must be referred to the Tribunal to issue an award in this regard.”

Know the law

Where either of the two parties to a lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than 90 days before the date on which the lease contract expires, unless otherwise agreed by the parties.

 

17 Oct 2017

Making cities an extension of a workplace

This year’s Knight Frank “Global Cities Report” looked at what constitutes best-in-class across all aspects of property: encompassing building design, occupier trends, place making, investment strategy, and mix of uses. However, success in real estate is often achieved by being on the ground where economic growth is strong.
This raises the question — what does a best-in-class city economy look like?

The answer is increasingly about having the culture, diversity, lifestyle, and opportunities necessary to draw talented people. While employers can provide a micro-location — the workplace — where these factors are brought together, they must similarly exist at a city-level to generate the critical mass of skilled and creative people necessary to feed growth for successful firms.

This creates a self-fulfilling prophesy in which the most talented people want to live there. In turn, the best employers locate there to tap that high value workforce.

The cities that genuinely achieve this are those in the lead ranking of global cities. Locations are losing businesses, jobs or investment to places that are.

In today’s world the cities that are successfully earning the right to be called a global city are those at the forefront of the tech and creative revolution, which is demonstrated by economic growth. Since 2007, the GDP of Berlin, with its thriving technology scene, has expanded by 19 per cent, whereas in finance-oriented Frankfurt output grew by just 5.9 per cent, according to Oxford Economics.

Similarly, in the US we see tech- and R&D-oriented cities like San Francisco (17.6 per cent GDP growth since 2007) and Boston (15.2 per cent) outperforming locations like Chicago (6.2 per cent) and Miami (6.6 per cent). However, note the level of growth seen since 2007 in cities such as London (21.2 per cent) and New York City (11.5 per cent).
Both were finance-led cities back in 2007, and which successfully re-weighted towards technology and the creative industries in the last decade. This arguably makes adaptability a greater strength than a large tech exposure. If the technology sector moves into a downturn, we will find out whether Berlin can quickly reposition itself towards the next rising industry.

To a property investor London and New York City offer the security of having proved themselves capable of reinvention. The picture that we see emerging is that the ability of a city to draw in fast rising tech and creative firms is defined by whether the location has the ability to become a city that offers inspiration and contains as much wow-factor as a Google office. If it hopes to draw firms of that calibre …

A city must provide the ambitious with a stage they want to succeed on, because impressing bohemian friends in the cool part of town is more important than pleasing any boss.

So logically the next and final question is simple, is Dubai a global super city?

It certainly does not lack the wow-factor, but Dubai is much more than the eye-catching commercial and residential real estate it is renowned for. In recent years, Dubai has excelled in attracting young international talent, but mainly to the worlds of finance and business.

Now Dubai is seeking to diversify by offering the kind of culture, work hubs and social spaces that see a new generation of creative pioneers who consider working and living in Dubai in the way they might in London, Berlin or New York. These amenities come in many package, from its offering of world-class lifestyle in locations such as DIFC, to the cultural offerings at Dubai Opera and Dubai Design District, The Dubai World Cup and Art Dubai.
All of this is underpinned by a population that contains over 200 nationalities.

These factors combined with Dubai’s strategic location and business credentials continue to produce results. The population has grown by over 85 per cent over the last decade and GDP by 29.5 per cent over the same time period. Dubai is certainly seen as a global city by both businesses and by employees.

To maintain its global city status, Dubai must continue to be an open, diverse and vibrant place to live and work to ensure it continues to excel as of one the world’s super cities. At a time where many developed economies are facing populist pressure to step back from globalisation, Dubai’s openness to it will mean it will continue to be a regional hub for global business.

25 Nov 2017

V Nagarajan: Norms for inherited property while filing the income tax return

I have inherited ancestral property in Bengaluru after the demise of my parents. My sister and myself are the legal heirs. Will it be included as deemed rent in the IT return? How do we treat this while submitting IT returns? Please clarify. Anantkumar, Dubai.

When you own two or more properties and if any property remains vacant and not self-occupied by the owner, it will be treated as a ‘deemed let out’ property. A notional rent will be computed for income-tax purposes. Since you and your sister are the owners of the inherited property, you will have to declare the notional rent in respect of the ancestral property in the proportion of your respective share in the property.

I sold a flat bought in Hyderabad in 2016 and reinvested in another flat this year. However, the possession of this flat is expected only in 2018 now as the developer has delayed the project. Do I have a remedy against the developer now? Hidayath, Sharjah
It is not clear whether the project has been registered under RERA or whether the project comes outside the purview of RERA depending on the regulation in Hyderabad. However, RERA insists that in case of delay in completion of projects, liability imposed on the developers to pay interest to the consumer is a direct remedy available to you.

The Act now obliges the developer to park 70 per cent of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money diverted to another project. Additionally you have a remedy through consumer redressal forum to seek compensation for deficiency in service which includes delay in giving possession of the house.

Our parents died without leaving a Will for the property. While the legal heirs are now disputing over the property, one or two beneficiaries are willing to relinquish their rights. What is the legal remedy to resolve this issue? Ramesh Krishnan, Dubai.

If your parents died intestate and there is a dispute between the legal heirs, they will have to approach a competent court, having jurisdiction to settle the dispute. As you mentioned, if some beneficiaries are willing to relinquish their rights to a property in favour of another legal heir, banks and other debtors may insist on NOC from other legal heirs.

Notes:

Logistics sector

The government has given infrastructure status to logistics sector. This is likely to attract more funding at competitive rates. The government has been working for quite some time to attract more investments into transport and logistics as part of efforts to bolster infrastructure development in the country.

The infrastructure status would help the logistics sector get credit at competitive rates and long a long-term basis, as rising logistics cost impacts global competitiveness of exporters. Logistics costs of exports are very high in India and so Indian goods are less competitive.

The definition of logistics includes industrial parks, warehouses, cold storages and transportation. Logistics infrastructure includes multimodal logistics park comprising inland container depot (ICD) with minimum investment of Rs 50 crore and minimum area of 10 acre.

A cold chain facility having an investment of at least Rs 15 crore as well as warehousing facility with investment of minimum Rs 25 crore would come under logistics infrastructure, in both cases, the facilities should also have a minimum required area.

Chennai is one of the top 10 global automotive clusters, and this sector continues to attract interest across various automotive ancillary units. The automobile and engineering companies already established in the state are actively deploying their expansion plans. Large original equipment manufacturers (OEMs) are insisting that their suppliers set up their facilities near their plants to enable them to maintain inventory support for just-in-time production.
For the current financial year, TN has a potential investments pipeline of over INR 19,033 crore. Since 2015, the state has seen over 46 investment proposals with cumulative investments of approx. INR 37,381 crore.

The resulting employment commitment from industries is over 30,000 direct jobs in the semi-skilled / skilled and unskilled categories. Apart from industrial activities, the logistics and warehousing industry is extremely upbeat in the state and keeping the market active.

24 Nov 2017

Pay as you throw waste fee for all Dubai buildings soon

Dubai: A new ‘pay as you throw’ waste fee is coming soon for Dubai buildings, Gulf News has learnt.
All buildings in Dubai will soon be charged for waste collection as Dubai Municipality has decided to outsource the service to the private sector, Gulf News can reveal.

A senior municipality official confirmed that the civic body would stop the waste collection and transportation service to all buildings that are considered as business — whether commercial or residential — after it announces the proposed tipping fee.

commets

Then, the building owners or property management companies will have to make a contract with private companies approved by the municipality for collecting and transporting waste to landfills, said Abdul Majeed Abdul Aziz Al Saifaie, director of the Waste Management Department.

A circular in this regard was sent out to building managements in different parts of Dubai recently, a copy of which was obtained by Gulf News. The circular says the building management companies have to make the waste collection contract with the private service provider before December 1.

The circular also contains the list of companies that have successfully complied with the requirements of the department and thus permitted to carry out their respective waste management-related activities like garbage collection, transportation and disposal services.

However, Al Saifaie said the plan has now been deferred.

“We were supposed to announce the tipping fee first, which we are going to do soon. We will give a maximum of six months for the buildings to make the contract after the tipping fee is announced,” he said.

The official did not provide the date of announcing the tipping fee which will be levied per tonne of garbage from the companies transporting waste to landfills. However, he estimated the move to outsource the waste collection service by the middle of next year. The move is part of the emirate’s integrated waste management plan and strategy to reduce the generation of waste going to its landfills.

However, the plan to introduce the new fee even for residential buildings is a deviation from the earlier plan the municipality had.

Earlier, the municipality had stated that the tipping fee will be levied for waste sent to landfills from private companies, that is, commercial services.

However, Al Saifaie said all buildings renting out spaces — whether for commercial or residential purposes — will be considered as a private business.

“Till now, we have been serving all these buildings for free,” he pointed out.

Dubai has so far been charging only Dh10 gate fee per trip from trucks dumping waste at its landfills.

“The owners [of the buildings from where waste is collected] have not been paying anything. How can we serve them for free when there is a tipping fee [on companies transporting waste]? That is why once the tipping fee will be introduced, these buildings are going to be charged [for waste generation],” he explained.

Zone-wise implementation

He said the municipality will implement the waste collection fee zone wise.
“We have not finished the zoning yet. But we will try to work it out with companies to choose three companies for each zone and offer the best price. We will make sure that they [building managements] won’t be ripped off by any of these companies [collecting waste].”

Currently, different waste management companies are charging different rates for their services. However, the official said the municipality will issue guidelines on the charges.

Asked if building managements will pass on the new fee to the tenants who are already paying five per cent of their rent as housing fee that is meant for civic services, Al Saifaie said:

“That is between the building management and the tenants. What people need to understand is that your waste generates pollution. So, we need to collect and treat the waste. The municipality continues to provide waste treatment services for free for all.”

The civic body has also been investing on recycling services and is working on a waste-to-energy plant which is expected to start operation in the second quarter of 2020.

All these new moves are part of the efforts to reduce the per capita solid waste generation per day to 900 gram as per the UAE’s National Agenda 2021. Dubai has also set its target to reduce 75 per cent of rubbish going to landfills by 2021.

The UAE has one of the highest waste generation rates, with each person in the country estimated to produce from 1.9kg to 2.5kg of waste everyday.

Dubai generates 8,200 tonnes of municipal solid waste per day, according to figures released in 2016.

Highlights
Dubai will announce a tipping fee soon.

This will be imposed on companies collecting and transporting waste to landfills.
Dubai Municipality will then completely stop waste collection and transporting services and outsource it to private sector.

All Dubai buildings — commercial and residential — will then have to make contracts with private firms for waste collection.

This will be done zone wise, with three companies assigned to provide services in each zone.
Buildings will be charged for waste collection by these companies which they will use to offset the tipping fee that they will have to pay to the municipality.

It is not known if the building managements will pass on the burden to occupants who generate waste.

26 Nov 2017

VAT can prompt UAE residential developers to get more generous

Dubai: Come 2018, property buyers can expect UAE developers to turn even more generous with their sales incentives, especially on the post-handover payment plans.

This is so because the upcoming VAT regulations on residential sales offers developers a zero rate on all residential sales within three years of the completion of a project. Any home sale done after those three years will come under the 5 per cent VAT scanner.

Because of that, developers have a definite timeline before them to complete their sales and not have to pay VAT. This being the case, UAE’s property market, especially the one in Dubai, can expect developers to launch off-plan sales even before they start construction on site.

Or they could “bring in more attractive payment plans,” said Faisal Durrani, Head of Research at Cluttons. “In extreme cases, a developer or two is offering payment schemes 10 years after handover. But we could see more of that happening as developers ensure they sell all of their stock at a particular building.”

Interestingly, developers have also been given a VAT-specific reason to finish construction. “They will be able to claim a rebate on the VAT of building materials provided they are able to sell within three years of completion,” said Durrani. “There is an incentive for developers that the schemes they bring to the market can be absorbed. But how people claim rebates need to be worked out.

“Clearly, if they are unable to sell within three years, that project is not a success. Developers in Dubai have been so used to the “build and they will come” mentality. VAT will go some way in making sure the stock developers bring in can be absorbed. That’s a bit of a sea change for developers in Dubai.” According to Sailesh Irani, Director at Sun & Sand Developers, “All VAT payments made by a developer to a building material supplier can be offset. That eventually comes through as a credit in the developer account.”

The surge in off-plan sales was there for the better part of this year, and it’s only over the last four weeks that there has been some drop in such activity. Market sources say that the period before, during and after Cityscape Global in Dubai recorded higher than average off-plan launches, and that developers might be taking a bit of a breather now.

“It could be that developers will need to think about building more affordable projects, to be reasonably sure of completing sales within the stipulated time,” said Durrani. “When we are talking about prime properties, those between Dh1,500-Dh2,000 a square foot, is the segment that is seeing the sharpest correction now.

“Thankfully, the days of speculative developers have gone. These one-off developers were weeded out because of regulatory changes, the doubling of registration fees, implementation of escrow, etc..”

But, according to Cluttons, the super-prime end of the Dubai market is more or less unaffected. The wealthy are still making those multi-million dollar purchases.

But a potential headache looms — “The Chinese are currently the fourth largest buyer demographic in Dubai property outside of GCC nationals. But there are restrictions on how much they can take out of China and spend overseas — right now, it’s set at $100,000 (Dh367.300) per person each year.

“There could be stricter policing by Chinese authorities over whether these levels are being breached. The property markets in Canada, the UK and Dubai could be affected if this policing gets serious.”

BOX

Dubai developers need to give serious thought to affordable options

The VAT guidelines are clear — no VAT on residential units at buildings within three years of their completion. But for developers to be extra sure, they need to rethink their offer mix.

Sticking with upscale projects — at Dh1,500-Dh2,000 a square foot — as their preference comes with a risk. There is already a sizeable supply of such properties in the marketplace. More of the same could have difficulty landing buyers.

“The affordable issue is yet to be addressed in full — the Dubai Land Department has been thinking about a quota system,” said Faisal Durrani of Cluttons. “In this, a certain proportion of the project is made affordable — but it’s not clear whether it’s affordable for tenants or buyers.

“They aim to have these in central locations and not the outskirts. It could mean a separate building or the affordable part is done on a lower floor. But it remains to be seen how it’s played out in a market like Dubai. Abu Dhabi has done it, with the Municipality allowing landlords to convert buildings, provided they meet certain criteria like size, location, proximity to bus stops. These are targeted at people earning less than Dh6,000 a month.

“The rents they can charge must only be a third of the tenant’s income. And the landlords are being guaranteed an yield of 30 per cent. A yield of 30 per cent — that’s probably too hard to resist.”

22 Nov 2017

UAE named MENA’s top residence by investment country

The UAE has been ranked as the Middle East and North Africa’s top residence-by-investment program for the third consecutive year, according to a new study.

Henley & Partners, the global residence and citizenship advisory firm, said the UAE has continued to rise in its annual Global Residence and Citizenship Programs (GRCP) 2017–2018 report.

However it cautioned that the upcoming implementation of VAT could impact the UAE’s residence program and how it will perform in the future.

It showed that the UAE ranked 11 globally out of 20 programs analysed with a score of 59 out of 100.

This represents an increase of two positions from last year and four positions from 2015, up from positions 13 and 15 respectively.

The report said: “The UAE offers a high quality of life and a high level of security for its residents. It is an excellent place to do business and provides easy access to the Middle East region.”

It added: “Additionally, citizens and residents of the UAE are not subject to personal income tax, capital gains taxes, or net worth taxes; however, VAT will apply from 2018 onwards.”

The trend for acquiring an overseas home is being driven by not just by individual and family quality of life, but also for tax purposes, investment returns, freedom of travel and the resultant business opportunities.

Marco Gantenbein, managing partner of Henley & Partners in the Middle East, said: “The UAE continues to be an attractive residence destination and consistently ranks highly in our annual indexes.

“For the third consecutive year, the UAE has increased in ranking, which can be attributed to its high scores across some of the key residence benchmark indicators. Since the launch of the Global Residence and Citizenship Programs report in 2015, the UAE has moved up in ranking significantly, by nearly 20 percent.”

Out of the 20 residence programs reviewed, Portugal’s Golden Residence Permit Program was named the world’s best, with a score of 79 out of 100. It was followed by Austria (78) and Belgium (77).

Similar to the UAE, the tax burden on residents of Portugal is one of the lowest of the residence programs ranked in the report, both on corporate and personal levels. A Portuguese residence permit also offers visa-free access to Europe’s Schengen area.

“Interest in the industry has steadily increased over the past decade and we anticipate that it will continue to do so,” said Gantenbein. “As political instability around the world furthers, we see an increase in demand for alternative residence. Key factors such as the need for global mobility, security and better quality of life are also significantly contributing to the growing interest in alternative residence and citizenship programs.”

20 Nov 2017

UAE residential property to be exempt from VAT, FTA clarifies

The UAE’s Federal Tax Authority (FTA) has clarified that commercial real estate will be subject to the five percent value added tax (VAT), with residential units largely exempt.

In a statement, the FTA noted that the first supply of a new residential building within the first three years following its construction will be zero-rated. Subsequently, all supplies will be exempt, even within the first three years.

All commercial properties, however, are subject to the 5 percent VAT.

FTA added that the owners of residential buildings do not need to register for VAT if they have no other business activities. Those who do, however, are advised to check whether they are required to register or not.

Owners of non-residential buildings are required to register if the value of supplies over the course of the preceding 12 months exceeds AED 375,000, or if the value is expected to exceed that figure in the next 30 days.

While owners of residential buildings will not be able to recover VAT on expenses related to the supply of exempt residential buildings, commercial building owners will generally be able to recover VAT on expenses.

For mixed use buildings, the rent and sale of residential portions of a building shall be treated as zero-rated or exempt – depending on whether it’s a first or subsequent supply – while the rent and sale of commercial parts of the building are subject to VAT.

The tax incurred by the owner of a mixed-us building needs to be apportioned where there is an exempt supply. The portion related to the taxable supply may be recovered.

19 Nov 2017

FTA clarifies regulations regarding VAT for the real estate sector

The Federal Tax Authority (FTA) has clarified regulations pertaining to Value Added Tax (VAT) when it comes to the real estate sector, stating that the supply of commercial real estate (selling or leasing) will be subject to the basic 5% tax rate, while residential units will remain generally exempt, except for the first supply of a new residential building within the first three years of it being constructed which will be 0% rated.

Residential and Commercial Buildings

The FTA defines the supply of real estate as activities that include, among other things, the sale, lease or giving of the right to any real estate.

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings that can be occupied by any person as main place of residence. This does not include any place that is not a building fixed to the ground and that can be moved without being damaged; any building that is used as a hotel, motel, bed and breakfast establishment, hospital or the like; a serviced apartment for which services in addition to the supply of accommodation are provided; and any building constructed or converted without lawful authority.

Meanwhile, a commercial building is any building or part thereof that is not a residential building. Examples include offices, warehouses, hotels, shops, etc.

Supply of Residential and Commercial Buildings

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, including all buildings or parts thereof that are not residential buildings.

Registration for VAT Purposes

The owners of residential buildings do not register for VAT if they do not have any other business activities. However, owners who do have other business activities must check to see whether or not they are required to register.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceed AED375,000 in value, or if it is expected that they will exceed AED375,000 over the coming 30 days.

VAT Recovery

An owner of a residential building will not be able to recover VAT on expenses related to the supply of the exempt residential building. Meanwhile, an owner of a commercial building will generally be able to recover VAT on expenses related to the supply of the building.

Mixed-Use Buildings

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply. The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

18 Nov 2017

Bounced cheques in UAE: new rules ‘a progressive step for the justice system’

Financial and legal experts in the UAE called the decision by Dubai Courts to issue fines instead of jail sentences for bounced cheques a “step in the right direction” to ensure those in chronic debt can resolve their issues.

Under a new criminal order issued by the Dubai Attorney General Essam Al Humaidan, a range of minor offences – including bouncing cheques and failing to pay rent – will no longer be put through the court system and instead be treated as a misdemeanour subject to a financial penalty.

The new ruling, which will come into effect in December, means those responsible for bounced cheques of up to Dh50,000 will be fined Dh2,000, while those who bounce cheques of between Dh50,000 and Dh100,000 must pay a Dh5,000 fine, with a Dh10,000 fine for cheques between Dh100,000 and Dh200,000.

Diana Hamade, a lawyer and the founder of International Advocate Legal Services, said the move “relieves people of the fear they have been subjected to” in the past when a bounced cheque was penalised by a jail term.

She added that she was among those “advocating the decriminalisation of bounced cheques due to the wording of the provision in the penal code related to the offence which presumes bad faith at the time of issuing the cheque”.

“The fine penalty is quite sufficient since the legislator obviously did not want to go all the way to decriminalise such offences and render them tortuous offences entailing civil damages,” she said.

Ms Hamade added that in the past the law had been “misused by many to blackmail others by filing complaints with the police and withdrawing them after receiving payments”.

Michael Routledge, who runs the debt advice site savememoney.ae to help chronic debtors find solutions to their credit woes, said the new ruling “is definitely a step in the right direction”.

Mr Routledge said many of the debtors who contact his site for help are worried about going to jail.

“The threat of going to prison for the inability to cover a cheque often can make people flee the country, with this new ruling there is a good chance that people will instead stick around to settle their debt,” he said.

“The banks do not gain anything from having someone sent to jail, as they have almost no way of getting their money back once this process is under way. This step will hopefully push lenders to work with consumers to help them restructure their debt.”

Debtors welcomed to the news, although they had concerns over how the new order will be implemented.

Manuel, a logistics coordinator from the Philippines, owes Dh185,000 on nine debts with seven banks. He and his wife bring in a joint income of almost Dh12,000.

“This is good news for us. My only question is, if the defaulter paid the fine imposed, will the loan be closed or can banks file a civil case for the repayment of the loan?” said Manuel, who also wanted to know if travel bans imposed on debtors going through the court process would also be lifted.

The Dubai resident, said the new ruling may stop banks threatening him with jail, but added that it would not stop the threats completely.

“The harassment I have received from collection agents has been offensive and it is demoralising; even thinking of what they said is too painful to bear.

“I wish that financial institutions also are ready to offer a solution that can be met by the defaulter as per his/her capability to repay. Until now, I am struggling to repay my debt and cover my basic needs as almost all my salary is going to repayments.”

keren bobker

Keren Bobker, an independent financial adviser with Holborn Assets, said the change in how bounced cheques are handled will offer debtors some “breathing space”. Mona Al Marzooqi/ The National

Keren Bobker, an independent financial adviser with Holborn Assets, said too many banks threaten people unnecessarily when payments are missed and that better results could be obtained by working with those in trouble.

“If debt collectors are no longer able to threaten people with the consequences of a criminal case, then they will have to find other options, and I hope that will mean offering solutions instead,” said Ms Bobker. “If someone is scared of going to prison, they will often avoid speaking to the bank for fear of the consequences. If they know that can’t happen, at least for smaller debts, then there can be constructive dialogue.”

Ms Bobker said the new order would offer those in chronic debt “a little breathing space”, although a fine on top the unpaid debt will “not make matters any easier”.

“Often a cheque will bounce as a person has not been paid themselves, rather than for a deliberate reason, and I think many residents have felt that the consequences have been a little harsh, especially when there are extenuating circumstances.

“In most countries bouncing a cheque, especially for a relatively small amount, does not result in a criminal case and this is yet another step to fall in line with global financial practices, as well as allowing the legal system to focus on the more serious cases,” she added.

Mario Volpi, the chief sales officer for Kensington Exclusive Properties, said the ruling will help to modernise the real estate business.

“The whole rental system is due an upgrade, starting with the tenant’s deposit. In time, this will no longer be paid directly to the landlord but instead paid into an escrow account to be used by the landlord under a controlled manner when appropriate,” he said.

“Further down the line, tenant referencing and credit checks must also come into play, eliminating rental payments in one go to more manageable monthly payments, but I stress that this may still take some time before it happens.”

However, Mr Volpi did not expect the measure to increase the number of people intentionally bouncing cheques.

“I’m sure the initial reaction from landlords was one of dismay, given the severity of writing out a cheque that then bounces has now been removed,” he said.

At Dubai’s One Day Court, set up to handle minor cases earlier this year, Ayman Abdul Hakam, its head, said fewer debtors will need to hire a lawyer for debt cases, estimating that 35 to 45 per cent of cheque-related cases will drop in the first month.

Ms Hamade said: “This move will be a relief for misdemeanour court judges since they are in fact overwhelmed, but the prosecution judges together with the police would also need to have a time frame set for such cases.”

However, she said that now that the “outcome is limited to a fine, things will definitely be less ambiguous and the certainty which is what is sought by all, including lawyers, is what will be more prevailing, which the legal system especially the criminal one in the UAE will benefit from”.

15 Nov 2017

163,000 properties to be delivered over next five years in Dubai

Dubai: If all goes as per developers’ plans, Dubai will see a further 163,840 properties being built over the next five years from 387 projects. Next year could account for the highest number of these handovers, at 27,360 units, based on broad estimates put out by fam Properties. The year after could see 19,850 units and 17,754 further homes in 2020.

So far in 2017, Dubai has seen the launch of 90 projects consisting of 36,556 units. “We took this initiative because we want our investors and buyers to have a more accurate picture of the Dubai property market by being able to analyse facts and figures in a new way,” said Firas Al Msaddi, CEO of f?m Properties. “This is something they’re eager for because it will help to make buying decisions based on facts and figures and is ultimately more profitable.”

The online tool also provides comparisons on the change of rent over time. Investors or end users keen to assess rental yield potential can take advantage of a rental range index which pinpoints rates over 10 years.

Although rental rates for the same category of apartments in the same area have varied greatly based on size and location over 10 years — a major factor in the buying decision — the gap has closed significantly in the last two to three years. Two-bed apartment rentals in Downtown Dubai ranged from Dh150,000-Dh260,000 in 2009 and reached a low of Dh95,000-Dh120,000 in 2012. In December 2016, rates were at Dh160,000-Dh180,000.

13 Nov 2017
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