VAT for Rental Homes Over $100k

Nov. 15, 2017, 10:47 a.m.

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EFFECTIVE from August 1, 2016, residential dwellings will not be exempt from VAT if the landlord’s gross residential rental income is more than $100,000 in a year. This week, Fiji

Revenue and Customs Authority acting CEO


speaks to senior business reporter ROPATE VALEMEI about VAT on residential dwellings.

TIMES: Please explain about VAT being charged on residential dwellings by landlords who let out their homes, rooms and flats that was announced in the 2016/2017 National Budget announcement.

DAS: If the annual gross residential rental income is less than $100,000, the supply of residential accommodation in a residential dwelling, excluding accommodation in commercial dwelling, is exempt from value added tax (VAT) under the provisions of Paragraph 2 First Schedule to the Value Added Tax Decree 1991.

TIMES: What happens in cases where the landlord supplies rent on commercial and residential purpose? Will all the rent collected for commercial and residential be part of the $100,000 annual threshold for VAT registration?

DAS: If the accommodation is supplied in a building that is rented out for residential and commercial purposes, only the total rent in a 12-month period from the letting of the residential part will be taken into account for the purpose of determining whether exemption applies or not. Supplies that are not exempt will be subject to VAT at the rate of 9 per cent.

TIMES: What is the process for VAT registration in cases where the annual residential accommodation rental income exceeds $100,000?

DAS: Any landlord or supplier of residential accommodation whose annual rental income is above $100,000 is liable to register and must do so within 21 days from August 1, 2016. Once registered for VAT, the person must include VAT in the amount of rent charged to tenants and will be able to claim any VAT paid on related purchases and expenses. Penalties will apply for failure to comply with any of the provisions of the VAT Decree. However, the person will not be liable to register if FRCA is satisfied that the value of all those supplies in the 12 months beginning on August 1, 2016, will not exceed $100,000. This would mean a change in the lease agreements and an increase in rent by 9 per cent VAT.

TIMES: Who is responsible for this?

DAS: The VAT-registered person or a responsible or accountable person will be required to make changes to lease agreements, provide information on pricing and issue tax invoices to their tenants. They will be required to keep records to support the computation of taxable supplies. The rentals agreements may vary from August 1, 2016, to include the VAT component.

TIMES: Can you give examples to determine whether a person will be subject to VAT registration or not?

DAS: Example 1

Mr X owns an apartment building with eight flats, of which two is occupied by his family. The rental income for the 12-month period beginning August 1, 2016, is expected to be $110,000. Mr X will be required to register and include VAT on the rent charged to each tenant.

Example 2

Mr Y’s gross turnover from business activities is $90,000. He is not registered for VAT. His residential rental income for 2016 will be $50,000. Mr Y is not required to register for VAT.

Example 3

Mr Z’s annual residential rental income is $120, 000 and other taxable turnover is $50,000. If Mr Z is a registered person, he will be required to include VAT in the rent charged to tenants. If not registered, he will be required to register and charge VAT on whole taxable supplies of $170,000.

Example 4

Ms A is already registered for VAT and earns residential rent of $120,000, which is currently an exempt supply. From August 1, 2016, Ms A has to charge VAT on all taxable supplies including the residential rent.

This article first appeared in The Fiji Times on July 6, 2016.