Labour Accommodations and VAT in the UAE – A Business Guide

 


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: For the first supply of residential buildings used as labor camps.
  • Exempt: For qualifying residential accommodations that meet FTA criteria.
  • 5% VAT: 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: One principal component (e.g., either serviced or residential) defines VAT treatment.
  • Mixed Supply: 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.

© 2025 Unicorn Global Solutions – Your Trusted VAT Consultants in Dubai.

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