VAT on Labour Camps : FTA authority underlines the importance of accurately determining the type of labour accommodation
VAT on Labour Camps : The Federal Tax Authority said on Tuesday that it classified labour accommodation into two categories for tax payment purposes taking into consideration whether the facility provides additional services making it subject to the standard 5 per cent Value Added Tax or a purely residential building and therefore exempt from VAT.
The Authority underlined the importance of accurately determining the type of labour accommodation as it would affect the VAT incurred by the supplier.
FTA went on to explain that “labour accommodation” refers to areas utilised by employers to house their staff, some of which offer additional services. The FTA also outlined four cases where these facilities are treated as residential buildings exempt from VAT. Details are provided on the website of FTA.
Ancillary services include: Cleaning of communal areas; maintenance services required for the general upkeep of the property; pest control; garbage collection; security; utilities, e.g. electricity, water, etc.; access to facilities within the building for residents to use themselves, e.g. launderette facilities, gym, pool, prayer rooms, etc.
Meanwhile, some of the additional services that do transform an accommodation into a serviced accommodation – and therefore, subject to 5% VAT – include: Telephone and internet access; cleaning of the rooms, other than purely the communal areas of the property; laundry services, including the regular changing of bed linen; catering; and maintenance services other than those required for the general upkeep of the property.
Saif Chartered Accountants