Dubai – Mubasher: Contracting firms in the UAE started adding a new item to tender offers for future projects, in preparation for the application of the value-added tax (VAT), real estate sources said, according to Alkhaleej newspaper.

The new construction contracts will include the VAT item, which will stand at 5% for construction activities, the media outlet reported, citing the sources as saying.

Applying the VAT on real estate will rely on whether the property is a commercial or residential project, as the commercial selling or leasing will be subject to the basic rate of 5%, according to the Federal Tax Authority of the UAE.

Residential properties are exempt from the VAT.

The UAE minister of finance Obaid Al Tayer forecast that applying the VAT will impact the UAE’s gross domestic product (GDP) by 0.04%, while the social impact will amount to 1.3%.

The GCC country forecast generating between AED 10 billion ($2.7 billion) and AED 12 billion ($3.2 billion) in the first year of the application of the VAT on all products and services, with the exception of 100 basic commodities.