Dhruva explores VAT implications in UAE's emerging tokenised real estate landscape
Dhruva observes that the precise VAT treatment hinges on whether these tokens are characterised as traditional real-estate interests or as 'virtual assets' under UAE law—a distinction that will determine the applicable rates on token issuance, secondary trading and rental income distributions.
Vlad Skibunov, Partner at Dhruva Consultants said, 'As the market embraces this innovation, understanding VAT implications is paramount, given the tokens' dual identity as both direct real estate interest and 'virtual assets' under UAE VAT legislation. If characterised as virtual assets, token issuance and secondary trading may follow VAT rules for financial services —potentially qualifying for exemption or zero-rating—whereas classification as traditional property interests would subject commercial assets to 5 percent VAT and exempt residential units. Rental income distributions and platform fees must likewise be analysed to determine whether they fall within real estate or financial transaction scopes.
'We are pleased to witness blockchain unlocking new opportunities in real estate investment. However, the complexity of VAT treatment for tokenised structures demands sophisticated analysis. Buyers and developers must factor VAT liabilities into their arrangements from the outset to avoid unexpected costs and ensure compliance. Dhruva is committed to providing actionable guidance on VAT classification and compliance for tokenised real estate. By closely analysing contractual frameworks and engaging proactively with the Federal Tax Authority, we support market participants in effectively incorporating VAT considerations when investing in this emerging digital investment model,' added Vlad.
Dhruva advises organizations on navigating complex compliance landscapes and delivering clarity in innovative transaction structures. A homegrown brand with a global outlook, Dhruva serves clients across diverse sectors, including oil & gas, healthcare, retail, construction, technology, artificial intelligence, and crypto. The firm is known for offering tailored tax strategies that address industry-specific challenges while identifying new opportunities for sustainable growth.
'As UAE businesses continue to innovate and adopt emerging technologies, it is essential that market participants approach evolving investment structures with care. Clear guidance and proactive engagement will be essential to ensure compliance and unlock the full potential of tokenised real estate in the UAE,' concluded Vlad.
About Dhruva Consultants
Dhruva Consultants is a leading tax advisory firm specializing in VAT, corporate tax, transfer pricing, and international taxation in the Middle East. With a strong track record in advising some of the largest real estate players in the UAE, Dhruva Consultants combines deep industry expertise with practical solutions, ensuring clients not only achieve compliance but also optimize their tax strategies for long-term success. https://dhruvaconsultants.com/.
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