The most awaiting clarification from UAE’s Federal Tax Authority (FTA) has been released through a recent VAT Clarification on Dubai Owners’ Associations and Management Entities. According to the VAT clarification VATP022, Dubai Owners’ Associations are required to deregister from VAT due to implications from Law No. 6 of 2019 issued in September 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai (“Law No. 6”). Management Entities are responsible to fulfill VAT obligations for such properties.
Key points-
- On 3rdNovember 2019, all rights and obligations of Dubai Owners’ Associations were transferred to Management Entities, which resulted in Dubai Owners’ Associations no longer making taxable supplies.
- Dubai Owners’ Associations were, therefore, required to apply for VAT deregistration within the period prescribed in the tax legislation of 20 business days; that is, no later than 4 December 2019.
- Based on all these, Dubai Owners’ Associations can no longer make any taxable supplies.
- Management Entity is regarded not as an agent but as making supplies to the owners of Jointly Owned Real Property. Management Entity is considered a taxable person and is required to issue valid tax invoices to the recipients of these supplies and VAT reporting.
- Management of a Jointly Owned Real Property constitutes a taxable supply of services, which is subject to 5% VAT.
- Management Entity, as a VAT registrant, is liable for any penalties which may arise as a result of non-compliance from VAT.
- A registrant applies for deregistration within 20 business days from the date the registrant stops making taxable supplies or where the value of taxable supplies made over the past 12 months is less than AED 187,500.
- The administrative penalty for failing to submit a deregistration application within the prescribed period is AED 10,000.
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