Labour Accommodation Exempt from VAT
August 10, 2018
The Federal Tax Authority has classified labour accommodation into two categories for tax payment purposes:
- facility providing additional services making it subject to the standard 5 % Value Added Tax (VAT)
- residential building and therefore exempt from VAT
The Authority highlighted the importance of accurately determining the type of labour accommodation as it would affect the VAT incurred by the supplier.
- Principal place of residence for employees.
- A building fixed to the ground and which cannot be moved without being damaged.
- The building was constructed with a lawful authority.
- The building is not similar to a hotel, motel, bed & breakfast establishment or services apartment for which services in addition to the supply of accommodation are provided.
- Cleaning of commercial areas
- Maintenance services of the property
- Pest control
- Utilities, e.g. electricity, water, etc.
- Access to facilities within the building for residents to use themselves e.g. launderette
- Facilities within the building (gym, pool, prayer rooms)
Providing below Services within the same Price converts the Accommodation from a Tax-exempt facility to one that is subject to 5% VAT
- Telephone and internet access
- Cleaning of the rooms
- Laundry services
- Maintenance services (other than those required for the general upkeep of the property)
If you have any queries or want to know more about it contact us.