What is the VAT difference between commercial and residential property in the UAE?

The core difference is how each is taxed. Commercial property (offices, shops, warehouses, hotels) is generally subject to UAE VAT at the standard rate of 5% on both sale and lease, and a VAT-registered owner using it for taxable business can usually recover related input VAT. Residential property is treated more favourably for occupiers: the first supply of a new home within the qualifying period is generally zero-rated, while later sales and leases of existing homes are generally exempt — so tenants and buyers of existing residential units typically pay no VAT. The trade-off is input-tax recovery: zero-rating lets a developer recover input VAT, but exempt supplies do not. "Residential" excludes hotels and serviced apartments, which follow the commercial-style treatment. For mixed-use buildings, the VAT position is split between the parts. These distinctions drive whether you must register, charge VAT, and how much input tax you can reclaim. Confirm the classification of each unit with the Federal Tax Authority, and for a portfolio you can compare verified UAE legal and tax professionals on LEXAI to structure it correctly.