Labour Accommodations and VAT in the UAE – A Business Guide
Understanding VAT on Labour Accommodations
Businesses providing labor accommodations in the UAE must accurately distinguish between residential and serviced accommodations for VAT classification. The Federal Tax Authority (FTA) has issued guidance (VATP003) on this matter to ensure transparency and compliance. Unicorn Global Solutions offers expert consulting to help businesses navigate VAT implications effectively. Read more about VAT on Labor Accommodations in the UAE here.
Applicable VAT Rates for Labor Accommodation
0% VAT:Â For the first supply of residential buildings used as labor camps.
Exempt:Â For qualifying residential accommodations that meet FTA criteria.
5% VAT:Â For serviced accommodations that offer additional commercial services.
FTA Criteria to Qualify as Residential Accommodation
Used as the primary residence by laborers.
Built as a permanent structure that cannot be relocated without damage.
Approved by legal authorities for residential purposes.
Not operated as a hotel, motel, serviced apartment, or commercial lodging.
Services That Do Not Affect Residential Status
Cleaning of common areas
Maintenance and repair services
Utilities (electricity, water, gas)
Security services
Pest control and waste removal
On-site amenities (e.g., gyms, prayer rooms, laundry)
What Qualifies as Serviced Accommodation?
Room-specific cleaning and housekeeping
Internet and telephone services
Laundry services, including linen replacement
Additional commercial services beyond basic housing
Composite vs. Mixed Supplies
VAT treatment also depends on whether the supply is:
Composite Supply:Â One principal component (e.g., either serviced or residential) defines VAT treatment.
Mixed Supply:Â Each component (e.g., accommodation + paid services) is treated separately under VAT regulations.
Unicorn Global Solutions can help assess the correct VAT categorization for composite or mixed supplies to ensure compliance.
VAT Services by Unicorn Global Solutions
We provide end-to-end VAT services in the UAE, including VAT registration, tax filing, advisory, and voluntary disclosures. Our team ensures your business meets FTA standards while maximizing compliance and efficiency.
Contact Us: For personalized VAT assistance, visit our website, text us on WhatsApp, or call us directly today.
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