Owners Associations ask – To VAT or not to VAT?

By Eudore R. Chand

DUBAI 28 February 2018: To VAT or not to VAT, that is the question facing Owners Associations in the new age of Value Added Tax (VAT) in the UAE.

Owners associations find themselves in a somewhat tricky position since the introduction of UAE-wide VAT from January 1st this year. Like many organisations, clarity on the exact rules and regulations remain murky, at best.

At the heart of this confusion lies the simple question of whether OA’s are tax exempt or not. Nobody seems able to give a proven answer on this subject, thus opening OA’s up to falling foul of their own inactivity.

The catch 22 positon revolves around whether OA’s are deemed taxable entities or whether they fall outside of this domain, like many service providers such as schools.

If an OA fails to register they may be hit with a Dh20,000 fine for non-registration. However, if they do undertake to pay VAT but are subsequently judged to be exempt, they have to go about trying to recover paid taxes.

If OA’s are found to be taxable entities this will add further costs to all OA’s in addition to the 5 per cent increase in fees. The individual associations will have to increase their internal costs to owners to cover the admin, budgeting and auditing fees associated with administering such a system.

Neither Rera nor the Federal Tax Authority (FTA) has committed either way at this stage, therefore Asteco has tried to solicit clarity on this subject with both parties, with no concrete answer forthcoming.

“As manager’s with insight and expertise in our field we have a duty of due diligence on behalf of the OAs to protect the industry to be treated equitably in terms of VAT. We are asking authorities for consultation and to provide substantiation of any decisions regarding OAs and VAT,” said Nicholas White, Associate Director, Asteco Owners Association

It is recommended that all OA’s take it upon themselves to seek professional advice from a taxation or legal specialist to be able to embark on the best course of action for the OA.