In a move that will likely please local realtors, the latest value-added tax (VAT) guidance for land and property has removed the tax from long-term residential rentals.
The exemption, which was announced in guidance documents released just three days before the implementation of VAT, answered one of the sector's lingering questions surrounding the tax. Previous guidelines had stated that any rental of a dwelling that lasted longer than 45 days wherein the landlord collected $100,000 or more would be subject to VAT.
VAT was introduced at a rate of 7.5 percent yesterday. Although the tax is now in full effect, many industries remain in consultation with the government over outstanding concerns.
Under the guidance, persons renting condo apartments or similar accommodations must determine the VAT treatment of properties according to their "normal use". The classifications are dependent on whether the properties are intended for short-term (less than 45 days) or long-term rentals.
"A one-off short-term rental of a condo that is usually rented on a long-term basis will not be considered a supply of a commercial rental establishment," stated the guidance.
The guidance similarly noted that renting out a dwelling intended for short-term stints for periods exceeding 45 days would result in the rental being considered a taxable activity.
While renting such accommodations directly to visitors on a long-term basis is exempt from VAT, the guidance states that, "if your supply of the accommodation is normally provided on a short-term basis of 45 days or less, then you are making taxable supplies."
Additionally, properties with separate rental contracts for both commercial and long-term residential elements will charge VAT on the commercial space, while the residential component remains exempt from VAT.

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