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UAE: VAT obligations of real estate management entities in Dubai

UAE: VAT obligations of real estate management entities

The tax authority of the United Arab Emirates (UAE) issued guidance informing owners associations and management entities in Dubai of their obligations under the value added tax (VAT) law that reflects changes in Dubai real estate legislation.

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Law No. 6 of 2019 provided that the rights and obligations of owners associations were to be transferred to management entities. The recent guidance confirms that owners associations are no longer considered to be legal persons and thus not able to register for VAT purposes.

Management entities (for these purposes) are identified as developers, management companies or hotel project management companies that manage common facilities and areas for property owners. In turn, the responsibility for charging and accounting for VAT due on the related management fees falls on these management entities.

When management entities are registered for VAT purposes, the tax authority expects that the previously charged VAT (charged the property owners by an owners association) for any management fees must now be accounted for by the management entities, which are now responsible for issuing tax invoices for these taxable supplies. Management entities can recover any VAT incurred in relation to making taxable supplies on receipt of valid tax invoices in their own names, subject to the normal rules for input VAT recovery.

Penalties can be imposed for noncompliance.

Read a November 2020 report prepared by the KPMG member firm in the UAE

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