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Abu Dhabi, UAEWednesday 20 June 2018

Homefront: Should UAE property agents charge VAT on commission?

The reader has noticed that rent is exempt from the tax, but it is applied to estate agent services

The Federal Tax Authority is urging businesses to register for VAT. Photo: Getty Images
The Federal Tax Authority is urging businesses to register for VAT. Photo: Getty Images

While there is no VAT on rent, agents are adding the tax to the commission they take. Is that right? NN, UAE

VAT is chargeable on the goods and services of all companies with a turnover of over Dh375,000. While VAT is not attached to the actual rental amount of residential property, it is chargeable on the commission if a tenant chooses to use the services of a broker. It is important to stress that this extra amount does not go into the broker's pocket but is passed on to the Federal Tax Authority (FTA) as demanded.

The best way to verify if a company is registered is to request to see their Tax Registration Number. In time, I suspect this will be visible on the FTA's website.

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Read more from Mario Volpi:

Homefront: 'My property agent is forcing me into a maintenance contract. Is that legal?'

Homefront: Is there a formal way for a landlord to withdraw an eviction notice?

Homefront: 'Can I get the deposit back if I don't move into my Dubai apartment?'

Homefront: 'My mouldy apartment is making me sick but the agency is refusing to clean it up'

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I moved out of my apartment in Dubai Marina towards the end of October 2017, just over two years after moving in (my move in date was August 2015). Towards the end of my lease, which should have been August 2017, I extended by a couple of extra months. I did not sign a new contract nor were there any Ejari issues. However, my agent is now refusing to give back my full deposit of Dh4,200. They want to deduct Dh1,700: a Dh1,000 administration fee for the contract extension (no documents were signed nor presented), a Dh500 fee for a bounced cheque that happened months before I moved out, and Dh200 for cleaning and two lightbulbs. In fact, the landlord owes me Dh550 for a new water heater I paid for, which he was meant to reimburse. When I moved in I actually spent nearly Dh2,000 having the apartment deep cleaned and painted, as it was dirty and infested with cockroaches. I have emailed both the landlord and agent - the agent keeps telling me he is travelling and the landlord does not respond. I don't know what to do; Dh1,700 is a lot of money considering the apartment was handed back in great condition and I don't want to walk away from that money as I know filing a complaint will be long and painful. What would you advise? SB, Dubai

Your dilemma is one of the most common I face when replying to renters' problems. This issue will continue to be a problem for tenants until the competent authorities adopt a stricter system when it comes to a tenant's deposit.

Looking at your situation specifically, you have three choices:

1. Continue communications with the agent and landlord to come to some agreement with what is fair and to discharge the amounts that are the responsibility of the landlord and tenant. With reference to the Dh1,000 admin fee, my first reaction was that this is very cheeky. Brokers do charge this amount for the renewal of the contract, but normally only when the renewal is for a full year not just a few months and especially as no new contract or paperwork has been prepared.

2. You could also file a case at the Rental Dispute Settlement Centre to get your full deposit back. This decision, however, will be based on your personal finances, as to file a case costs 3.5 per cent of the rental amount. Should the case be found in your favour, the filing cost is normally included in your award. Looking at the amount in question this choice may not be a wise decision in terms of time, effort and expense.

3. Your last choice is to put this whole thing down to experience and move on. I realise this option is probably not a preferred move given that it is expensive to just walk away.

In reality, all three options may not necessarily give you the conclusion you seek but unfortunately the deposit system in its present form will mean you have to involve time and effort to get some form of satisfaction.

Mario Volpi is the chief sales officer for Kensington Exclusive Properties and has worked in the property industry for over 30 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@kensington.ae