Labour Accommodation Exempt from VAT

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.

Condition

• 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.

Additional Services that may be Offered

• Cleaning of commercial areas
• Maintenance services of the property
• Pest control
• Security
• 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
• Catering
• 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.

Tag: Accomodation, Labour, Uae, Vat