The Tribune

The Ministry of Finance yesterday confirmed that maintenance fees for condominium and homeowners’ associations will be subject to Value-Added Tax (VAT) if annual billings exceed the mandatory $100,000 registration threshold, although there is “no upside revenue potential” for the Government.

The Ministry, in a statement, said some associations may not reach this threshold until property insurance services become VATable in July 2015.

In such cases, mandatory registration would be put off for six months, but the Ministry encouraged these associations to register initially on a voluntary basis so that transparent billing practices can be followed from the start.

The Ministry of Finance said one advantage of registration is that condominium and home owners associations can issue VAT invoices to VAT registrants who use such properties as vacation rentals.

It added that while homeowner associations operate as non-profits, their services are of a cost recovery nature, just like common area maintenance charges on commercial rentals and leases.

A Ministry of Finance spokesperson said: “Because of this, many associations will see little difference between the adjustment in maintenance fees billed and the change in VAT inclusive expenses charged to them by service providers.

“In these cases, the collection of VAT from homeowners will match very closely the input credits that associations would be able to claim. There is no upside revenue potential for the Government.”

Associations could find, however, that there is net revenue that must be paid to the Government if they directly employ a significant number of staff to provide homeowner services.

A Business Licence fee will not be imposed on homeowner associations. However, residential real estate held as an asset for investment/commercial purposes may be subject to Business Licence fees and VAT when used as vacation rentals.