The Federal Tax Authority (FTA) has recently issued VAT Public Clarification No. VATP003 titled Labour accommodation: residential versus serviced property clarifying instances, when the supply of labour accommodation shall be a ‘supply of residential property’, and other instances where the supply of certain labour accommodation shall be a supply of ‘serviced accommodation’.
The distinction is important as it will affect the VAT liability of the supply.
Generally, labour accommodation will be considered as a residential building, however, in cases where residents are provided with additional services on top of living accommodation, it is necessary to consider whether the extent of the additional services provided would move the supply from one of residential accommodation to serviced accommodation.
In this regard, the FTA has clarified that where those additional services are incidental to the main supply of accommodation and not provided for an additional fee, they should not normally cause the supply to become one of serviced accommodation. Such incidental services may include cleaning of communal areas, maintenance services required for the general upkeep of the property, pest control, garbage collection, security, utilities such as electricity and water, and access to facilities within the building for residents to use themselves including launderette facilities, gym, pool, and prayer rooms.
Further, the additional services which may indicate that the supply is one of serviced accommodation, rather than residential accommodation, may include telephone and internet access, cleaning services for areas other than purely the communal areas of the property, laundry services, including the regular changing of bed linen, catering, maintenance services other than those required for the general upkeep of the property.
Other than the factors outlined above, suppliers are also required to consider whether they are making a single composite supply, or whether they are making a mixed supply of several different component parts.