10% VAT on Residential Rental Income

All persons who own properties that earn more than the Value Added Tax (VAT) threshold of EC$120,000 per year, will have to register to pay VAT, even if the accommodation is rented for residential use.

Parliamentarians in the House of Representatives on Friday approved an amendment to the Value Added Tax legislation that will require all suppliers of accommodation to register and pay a 10% VAT of the amount charged for the property.

Under the law, ‘accommodation’ includes: a supply of accommodation in a building, part of a building, a group of buildings (including the structures within the cartilage thereof) that constitute a hotel, motel, boarding house, guest house, villas, an inn, a student housing dormitories, apartment complex, private house or a room or similar establishment in which lodging is regularly or normally provided for a daily, weekly, monthly, or other periodic considerations.

Accommodation also includes a supply of accommodation in, or the right to occupy as a residence, a caravan, houseboat, camping site, boat, marina berth or similar place, on terms commensurate with those of landlord and tenant if the accommodation is provided to an individual, (alone or together with other individuals).

Finance Minister Dr Keith Mitchell presented the Bill to the House, and explained that the legislation is meant to plug the holes within the system that allows for some to get away without paying tax to the system. “If you are making thousands of United States dollars, you have to pay your fair share,” he said.

All accommodation suppliers will have to register before 31 July, as the law is expected to go into effect as of 1 August 2014. Failure to register the accommodation with the VAT Unit can result in penalties that includes fines in excess of EC$5,000.

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