Owners Associations - UAE VAT Public Clarification

Owners' associations- Public  Clarification

The Past:

Owners' associations (OA) have been in a somewhat tricky position since the introduction of value added tax (VAT) in the UAE in January. The exact rules and regulations remain unclear and at the heart of this confusion lies the simple question of whether OAs are tax exempt or not.

FTA in past clarified that OAs that were operating independently from the developer or property management companies needed to register for VAT. Most OAs, largely governed by the Real Estate Regulatory Authority (Rera), remain unregistered for VAT amid confusion about its applicability on their services. Experts point out that services provided by OAs are seen as a taxable category and are subject to the standard VAT rates.

Owners Association (OA): If OA either has a legal personality or is registered as OA and can enter into a contract with third parties then the owners association should levy VAT on its charges to its members and should issue a tax invoice.

Owners’ Associations and Management Entities

• In addition to Owner’s Associations (OAs), VAT real Estate guide now includes reference to Management Entities (MEs). While OAs are usually composed of owners of the individual units in a building, MEs may include the developer, management company, or hotel project management company as applicable.
• The new version of the guide states that OAs and MEs are considered persons for VAT purposes and are required to register if their supplies exceed the VAT registration threshold. Previously, the guide only stated that OAs are required to register for VAT.
• All other provisions related to OAs appear to also apply to MEs.

New Guidelines of Real Estate Regulatory Agency (RERA) for Value Added Tax (VAT)

Recently ,RERA has noted that Owners’ Association Management Companies are issuing Service Charge Invoices to Unit Owners using TRN of Owners’ Association rather than TRN of Owners’ Association Management Company.

This is a violation of VAT law and its implementing regulations.

Therefore, according to the provisions of Law No. (6) Of 2019 regarding Ownership of Jointly Owned Real Property in the Emirate of Dubai, the Owners’ Association Management Companies are obligated to comply with the following:

1-    Owners’ Association Management Companies must immediately settle all VAT liabilities of Owners’ Association and de-register it with FTA.

2-    Owners’ Association Management Companies must immediately register themselves with FTA to collect VAT on Service Charges from Unit Owners.

3-    Owners’ Association Management Companies must immediately apply Law No. (6) Of 2019 and stop using TRN of Owners’ Association when issuing Service Charge invoices to Unit Owners.

Now, FTA's  public clarification on Dubai Owners’ Associations and Management Entities (VATP022)

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You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax