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What you need to know now
The 2019 Dubai owners-association transition had a specific legal and tax context. Current management entities must analyse their own supplies and registration position.
The original article is preserved below as a historical record. Earlier deadlines, rates, offers and approval statements should not be used as current guidance.
- The December 2019 deadline is historical.
- Identify which entity now supplies the services.
- Review contracts and service-charge accounting.
Identify the entity and its actual role
Property management can involve an owner, an owners’ body, a management company and contractors working on the same building. The name on a service-charge demand does not by itself identify every VAT supply. Review who contracts with the customer, who appoints suppliers and whether an amount is received for that entity’s own services or on another party’s behalf. Keep the original article’s one-off restructuring context separate from this current transaction review.
Map charges to contracts and invoices
Prepare a schedule that connects each income stream to the agreement supporting it. Distinguish management fees, maintenance charges, amounts collected for another party and other building-related receipts. Then review the corresponding supplier invoices and the entity named as recipient. A bank account containing service-charge collections is not enough evidence to decide who supplied the service or who may recover input tax. Contractual responsibilities and the invoicing chain need to agree.
Review changes in responsibility
When management responsibility moves between entities, document the effective date and what happened to contracts, outstanding invoices, credit notes, collections and supplier balances. A change in the property administration framework does not mean every property manager should deregister. Review the continuing activities of the particular legal person and obtain evidence of any cessation. Communicate invoice instructions to contractors so new expenditure does not continue to be addressed to a former entity.
Build a property-level reconciliation
For each managed property, reconcile demands raised, receipts, supplier costs and the VAT treatment used in the return. Investigate differences rather than treating them automatically as tax errors: they may reflect arrears, timing, agency collections or incorrect billing. Keep a separate decision file for registration or deregistration. The old notice below can explain why a historical change occurred, but it should not be used as a current application deadline or universal treatment for all buildings. An invoice register by property and contracting entity can make an incomplete handover visible before the next return is prepared.
YOUR NEXT STEPS
A practical way forward
- 01
Step 1
Confirm the entity’s legal role.
- 02
Step 2
Map the consideration and supplies it makes.
- 03
Step 3
Reconcile invoices, contracts and registration details.
CLEAR ANSWERS
Frequently asked questions
Is the 2019 deregistration deadline a new deadline?
No.
Can all property management entities deregister?
No. Assess the entity’s actual activities.
Read the original article First published 19 November 2020 · retained for context
This earlier article is preserved for context. Its rates, deadlines, approvals and announcements may have been superseded. Use the current guidance and official references on this page for your next step.
UAE Real Estate Management Entities – Accounting for VAT
UAE Real Estate Management Entities – Accounting for VAT
VAT Public Clarification: Dubai Owners’ Associations and Management Entities
On 3 November 2019, all rights and obligations of Dubai Owners’ Associations were transferred to Management Entities, which resulted in Dubai Owners’ Associations no longer making taxable supplies.
Dubai Owners’ Associations were, therefore, required to apply for VAT deregistration within the period prescribed in the tax legislation of 20 business days; that is, no later than 4 December 2019.
Owners’ Associations – VAT deregistration
On the basis that all of the Owners’ Associations’ rights and obligations were transferred to Management Entities, the Owners’ Associations no longer make any taxable supplies.
According to Article 21(1) of the Decree-Law, a registrant shall apply for tax deregistration if he stops making taxable supplies.
Article 14(2) of the Executive Regulation3 requires that a registrant applies for deregistration within 20 business days from the date the registrant stops making taxable supplies or where the value of taxable supplies made over the past 12 months is less than AED 187,500.
Based on the above, any VAT registered Owners’ Association that failed to apply for VAT deregistration within 20 business days from the date it stopped making taxable supplies is liable for an administrative penalty under Article 25(1)(d) of the Tax Procedures Law”. The administrative penalty for failing to submit a deregistration application within the prescribed period is AED 10,000.
Management Entities – Accounting for VAT
For VAT purposes, the Management Entity is not regarded as an agent who is just managing the building on behalf of the owners of the units but, as a result of Law No. 6, as the person supplying goods and services to the owners of the units.
The management of a Jointly Owned Real Property constitutes a taxable supply of services, which is subject to 5% VAT, regardless of whether there are limitations on the use of service charges collected.
As a registrant making taxable supplies, the Management Entity, under Article 65(1) of the Decree-Law is required to issue valid tax invoices to the recipients of these supplies.
If the Management Entity fails to issue valid tax invoices and tax credit notes (where applicable), the Management Entity would be liable for administrative penalties, regardless of whether the Management Entity issued the invalid documents or whether the documents were issued via any other third party system. The administrative penalty for failing to issue valid tax invoices and tax credit notes is AED 5,000 per document.
The Management Entity is required to report the amounts received (in the form of service charges or otherwise) and the related VAT amount in Box 1b of its VAT return. The Management Entity is entitled, under Article 54(1)(a) of the Decree-Law, to recover VAT paid in respect of goods and services acquired to manage the Jointly Owned Real Property, provided the it obtains and retains valid tax invoices addressed to the Management Entity.
The Management Entity, as a VAT registrant, is liable for any penalties which may arise as a result of submitting incorrect tax returns, including instances where VAT was not declared on service fees charged to owners.
Learn More: FTA Authority
VERIFY THE DETAIL
Official sources & further reading
Source checks support this general guide. Your treatment depends on the facts, tax period and applicable legislation.
