Residential rent is a VAT exempted service charge under the VAT Decree 1991 (VATD). In the first schedule of the VATD, the following exemption statement is provided:
“The supply of accommodation in a residential dwelling by way of hires (rents) provided it is used predominantly as a place or residence or abode excluding residential apartments which provide hotel-like accommodation and facilities.”
Based on the above, all residential apartments that have some of the common features below were not exempted from VAT:
- Security services
- Housekeeping and /or laundry services
- Free access to TV channels
- Free or paid internet services such as Wi-Fi and emails
- Provision of swimming pools
- Provision of meals
- Recreational area e.g. shared gyms, pools
- Booking system for accommodation
- Cooking facilities with other services
- Any other service to ensure safety and comfort.
VAT on Residential Rent under the 2016/2017 Budget
The 2016/2017 budget announcement, government has changed the exemption condition from “accommodation with hotel-like facilities” to the following criteria-
- 9% VAT on residential rent is applicable, if the landlord is already registered supplier under Section 22 of the VAT Decree 1991;
- 9% VAT on residential rent is applicable if the landlord is registered under VAT based on the following-
- If total annual turnover exceeds $100,000 – Compulsory registration;
- if total annual turnover is less than $100,000 – Voluntary registration.
- If none of the above applies, a landlord cannot charge VAT on residential rent.
Is Charging of VAT on residential rent constitute an illegal increase in rent?
The addition of VAT on residential rent as introduced under the 2016/2017 budget announcement will NOT constitute an increase of rent or a breach of the Commerce (Rent Increase Restriction on Residential and Ground Rent) Order, 2015. It implies that the addition of 9% VAT under the revised terms supersedes any agreement
How does a landlord show by record the addition of VAT?
Every landlord who charges VAT based on the criteria depicted above, must ensure that the VAT component is clearly shown separately on the receipt or invoice.
Also all advertisements or representations made about a residential property or accommodation to be predominantly used for residential purposes must state whether rent is subject to VAT or not depending on the registration status of the landlord.
This article by the Fiji Commerce Commission is part of a weekly column and first published in the Fiji Sun on August 8, 2016.