Dubai: Property token investments are rapidly gaining popularity among investors based in the UAE — with tokens often being sold out within minutes. But a key question looms: Will these token-based investments be subject to VAT?
The answer lies in how the tokens are legally classified — whether as real estate assets or virtual assets under UAE law.
“If classified as real estate, commercial tokens may be subject to 5% VAT, while residential tokens could be exempt,” said Vlad Skibunov, Partner at Dhruva Consultants.
On the other hand, if treated as virtual assets, the issuance and secondary trading of tokens may fall under the VAT regime applicable to financial services, potentially qualifying for exemption or zero-rating.
Rental Income and Platform Fees Also Under Scrutiny
As Skibunov explains, rental income generated from tokenized properties would add to investor returns. Therefore, it’s important to determine whether such income and platform service fees fall under real estate transactions or financial services for VAT purposes.
Crypto Investments Currently Outside UAE Tax Scope
The UAE government recently confirmed that virtual asset investments like Bitcoin and other cryptocurrencies will not be taxed, which has further fueled interest in the crypto sector. Property tokenization is now becoming a part of this growing investment mix.
Advisory to Developers and Investors
“Developers and buyers must factor VAT obligations into their agreements from the outset,” Skibunov emphasized. This would help avoid unexpected costs and ensure full legal compliance.
