Summary
Dubai owner’s associations are required to deregister from VAT due to Law No. 6 of 2019. Law No. 6 has also stated that management entities have to fulfil their VAT obligations for such properties.
Key highlights
- All legal rights and functional obligations were transferred to Management Entities on 3rd November 2019, which resulted in Dubai Owner’s Association can no longer make taxable supplies.
- Furthermore, Dubai Owner’s Association needs to apply for VAT deregistration within 20 business days, as prescribed in the tax legislation, that is 4th December 2019.
- Now Management Entities have to make supplies to the owners of the jointly owned Real property and are regarded to fulfil VAT obligations, including the issuance of valid tax invoices and VAT reporting.
Requirement of Law 6:
Law No. 6 transferred all legal rights and obligations of Owner’s Associations to Management Entities.
A registrant can deregister within 20 business days if they stopped supplying taxable items or value is below AED 187,500.
If they fail to do so, they will be penalized AED 10,000.
Owner associations to deregister:
Law 6 transferred rights and obligations of Owner’s Associations to Management Entities.
Based on the rules mentioned above, Dubai Owner’s Association who were VAT registered, required to apply for deregistration by 4th December, 2019.
Owner’s Associations that fail to deregister from VAT within 20 days are liable for penalties.
Management Entities to Account for VAT:
The Management Entity is not regarded as an agent any longer for VAT purposes but as an authorized person supplying goods and services to the owners of the units (as a result of Law No. 6), that makes Management Entity a taxable person and as per Article 65(1) of the Decree-law, it is required to issue valid tax invoices to the recipients of these supplies.
Jointly Owned Real property management will carry out a taxable supply of services, which is subject to 5% VAT.
Management Entity can recover VAT on goods and services for jointly owned real estate, with valid invoices.
As a VAT registrant, Management Entity is liable and responsible for any penalties that may arise of non-compliance from VAT.
Source: FTA
Get in touch with us for your all your TAX matters requirements click here