In a major move, the UAE government has decided to exempt residential property, undeveloped land besides some financial services and local transport from the five per cent value-added tax (VAT) to be introduced from January 1, said a report.

However, supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate, reported The National citing the finance ministry sources.

On the other hand, supplies of residential properties will generally be exempt from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties,  stated the report.

According to IMF, the implementation of the GCC-wide tax is expected to boost the GDP (gross domestic product) by about 1.5 per cent, it added.