Article 44 of Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Executive Regulations”) describes the definition of “bare land” for the purposes of the exemption from VAT set out in Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Law”). Article 37 of the Executive Regulations describes the definition of “residential building” for the purposes of the zero-rating (in respect of the first supply) and the exemption from VAT as set out in the VAT Law.

The VAT Real Estate Guide provides some clarity on the interpretation of these provisions in the context of farmhouses and farmland. The FTA is aware of a number of circumstances whereby additional clarity has been sought on the VAT status of farmhouses and farmland.

It is often necessary to consider each supply on its individual facts where farmland and buildings are concerned. However, there are a number of principles that can be applied when discussing the VAT treatment of supplies (by way of sale or lease) of both farmland and farm buildings:

• Farm houses which meet the conditions to be treated as a residential building should be exempt from VAT (or zero-rated in the case of the first supply after construction). A building will typically be a residential building where it is occupied by a person as their principal place of residence;
• Other farm buildings not intended to be used as a principal place of residence will be subject to the standard rate of VAT. This would include farm houses which are not used by a person as their principal place of residence, e.g. houses used as weekend homes only;
• Farm land which is considered ‘covered’ with buildings or civil engineering works should be subject to VAT at the standard rate;
• Farm land which is considered ‘bare land’, i.e. the plot has no buildings or civil engineering work (not even in-built irrigation etc), should be exempt from VAT; and
• The supply of a farm as a whole should be considered in light of the rules regarding composite or mixed supplies and any consideration apportioned appropriately where applicable.

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