A buyer who has done two or three residential deals in Dubai arrives at their first office purchase assuming the process is the same with a different floor plan. It is not. Two rules diverge sharply from the residential market, and both of them are cash-flow events rather than footnotes.
The first is VAT. Commercial property is standard-rated at 5%, and the buyer pays that 5% straight to the Federal Tax Authority, on a separate portal, before the Dubai Land Department will process the transfer. The second is that the Central Bank loan-to-value caps every Dubai mortgage article quotes — 80%, 70%, 50% off-plan — are written for residential property and do not govern a commercial purchase.
Get those two wrong and a deal that looked like 6.5% in costs turns into something closer to 12%, half of it due before you reach the trustee office.
The VAT Rule, From the FTA's Own Guide
Residential property in Dubai is effectively outside VAT: the first sale of a new home within three years of completion is zero-rated, and every later residential sale or lease is exempt. Commercial property is the opposite. Offices, shops, warehouses, showrooms and industrial units are standard-rated at 5% on both sale and lease.
What matters is the mechanism, which the Federal Tax Authority sets out in its VAT Payment User Guide for Commercial Property Buyers. On a sale, the buyer does not hand the VAT to the seller along with the price. The buyer logs into the FTA e-Services portal, opens the My Payments tab, and makes a miscellaneous payment under the heading Commercial Property Sale, entering the land department, the transaction date, the Land Department transaction number, the sale amount and the VAT amount.
The guide is unambiguous about sequence. You must complete the VAT payment before you start the ownership transfer process with the Land Department. The portal then issues a Payment Transaction Number, and that number has to travel with you to the Land Department. Without it, in the FTA's own words, the purchase cannot proceed.
The seller still issues a tax invoice showing the VAT amount and their tax registration number, and you keep a copy. But the money goes to the FTA, not to the seller.
Three Cases Where This Does Not Apply
The FTA guide lists its own exclusions, and they are worth knowing because two of them are commonly misapplied.
- Residential sales and leases. Entirely outside this process.
- Leases of commercial property. A commercial lease is still standard-rated at 5%, but the landlord charges and accounts for it in the ordinary way. There is no direct-to-FTA payment on a lease.
- A tenanted commercial property sold to a taxable person where the sale qualifies as the transfer of a business. This is the transfer-of-going-concern treatment. Where it applies, the special payment process does not, and the VAT is handled through the seller's return instead.
That third case is the one to raise with your tax adviser before signing, because on a let office it can change the VAT treatment of the whole transaction. It is also fact-specific, and not something to assume.
Where the seller is a developer selling its own new commercial stock, the VAT is normally accounted for through the developer's own returns rather than this buyer-payment route. Confirm which route applies to your deal in writing before you plan the cash.
Can You Recover It?
If you are VAT-registered in the UAE and the property is used for your taxable business, the 5% is input tax and recoverable through your return, subject to the ordinary rules. That turns a cost into a timing problem — you still have to fund it at transfer and wait for the refund cycle.
If you are not registered, or you are buying as an individual for passive rental income below the registration threshold, the 5% is simply a cost. The threshold matters here: mandatory VAT registration starts at AED 375,000 of annual taxable turnover, with voluntary registration available from AED 187,500. An investor whose commercial rent clears the mandatory threshold is required to register, charge VAT on the rent and file returns, which is a compliance burden residential landlords in Dubai do not carry at all.
The Loan-to-Value Table Does Not Apply
Article 1 of the Central Bank's Regulations Regarding Mortgage Loans, issued as Circular No. 31 of 2013, defines a mortgage loan as one collateralised against a residential property, granted to construct, purchase or renovate a house for owner-occupation or investment. Loan-to-value is likewise defined against the appraised value of the residential property.
Commercial property sits outside that scope. So there is no regulatory 80% or 70% ceiling to point at, and equally no regulatory floor protecting you. Commercial lending in Dubai is bank-by-bank credit policy, and in practice it is tighter than residential: expect roughly 50% to 65% of value, shorter terms, and underwriting that looks harder at the tenant, the lease and the covenant than at your salary.
Plan on funding 35% to 50% of the price in equity, plus the full cost stack below, and treat any higher number as something to be confirmed by a credit-approved offer rather than a broker's indication.
What a Commercial Purchase Actually Costs
| Item | Typical figure |
|---|---|
| VAT on the sale | 5% of the price, paid to the FTA before transfer |
| DLD transfer fee | 4% of the price |
| DLD admin fee | AED 580 |
| Trustee office fee | AED 4,000 under 500k, AED 4,200 above, plus VAT |
| Agency commission | 2% plus 5% VAT |
| Mortgage registration, if financed | 0.25% of the loan plus AED 290 |
| Valuation | around AED 3,000 to 7,000, higher than residential |
On a AED 3 million office bought with cash, that is roughly AED 150,000 of VAT plus about AED 195,000 of transaction costs — around 11.5% of the price, against the 6.5% a cash residential buyer pays. The VAT may be recoverable; the rest is not.
Where Commercial Is Genuinely Better
The case for commercial is not the cost stack, it is the income.
Gross yields on well-let Dubai offices and retail generally run above residential — commonly 7% to 9% against the 5% to 7% of a mid-market apartment — and the lease structures are more landlord-friendly. Commercial tenancies run longer, frequently three to five years with fixed escalations written in, and in many leases the tenant carries service charges, cooling and fit-out directly rather than the owner absorbing them.
Vacancy is the trade. A residential unit in JVC re-lets in weeks at a known rent. An empty 2,000 square foot office can sit for months, and during that time you are carrying service charges, cooling capacity charges and, if you are registered, the compliance overhead. Commercial income is lumpier and more tenant-dependent, which is why underwriting the covenant matters more than the postcode.
Ownership, Zoning and Residency
Foreign nationals can own commercial property freehold in Dubai's designated areas on the same basis as residential, and Business Bay, DIFC, Jumeirah Lake Towers and the free zone districts all contain freehold commercial stock. Two cautions apply. Zoning is specific — a unit licensed as an office cannot simply be run as a clinic or a nursery without approvals — and within free zones, ownership and leasing rules are set by the zone authority as well as the Land Department.
On residency, the published Golden Visa criterion is a freehold property with a Dubai Land Department valuation of at least AED 2 million, and nothing in the stated criteria excludes commercial freehold on its face. We have not been able to locate a published decision confirming that a commercial unit qualifies, so treat it as something to verify with the Land Department for your specific unit before you buy on that basis rather than as a settled route.
Questions Commercial Buyers Ask
Do I pay VAT on commercial property in Dubai?
Yes. Commercial property is standard-rated at 5% on both sale and lease, unlike residential property, which is exempt or zero-rated. On a sale the buyer pays the 5% directly to the Federal Tax Authority through the e-Services portal before the Land Department will process the transfer, and must bring the resulting Payment Transaction Number to the transfer appointment.
Can I recover the VAT I pay on a commercial property?
If you are VAT-registered in the UAE and the property is used for your taxable business, the 5% is input tax and recoverable through your return under the ordinary rules. If you are not registered, it is a straight cost. Mandatory registration begins at AED 375,000 of annual taxable turnover, so an investor whose commercial rent exceeds that must register and charge VAT on the rent.
How much can I borrow against commercial property in Dubai?
There is no Central Bank cap, because the Regulations Regarding Mortgage Loans apply to residential property. Commercial lending is set by each bank's credit policy and is tighter than residential — typically around 50% to 65% of value, on shorter terms, with the tenant and lease underwritten closely. Budget 35% to 50% in equity and rely only on a credit-approved offer.
Are commercial yields in Dubai higher than residential?
Usually yes. Well-let offices and retail commonly show 7% to 9% gross against 5% to 7% for mid-market apartments, helped by longer leases with fixed escalations and by tenants carrying more of the running costs. The offset is vacancy risk: a vacant commercial unit can take months to re-let while you continue paying service charges and cooling.
Can a foreigner buy an office in Dubai?
Yes, on the same freehold basis as residential property in Dubai's designated freehold areas, including Business Bay, DIFC and Jumeirah Lake Towers. Check two things beyond title: the permitted use under the unit's zoning, and any additional rules set by the free zone authority where the building sits inside one.
The Short Version
Commercial property in Dubai is a better income asset bought on worse terms. Budget 5% VAT paid to the FTA before transfer and roughly 11.5% in total costs on a cash purchase, ignore the residential loan-to-value table, fund half the price yourself, and underwrite the tenant rather than the view.
