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VAT Update: Public Clarifications on farm houses/farm land

The Federal Tax Authority (FTA) has published Public Clarifications on public transportation and farm houses/farm land with respect to VAT.

Analysis: VAT Public Clarification VATP008 on farm houses and farm land

following key points:

  • Farm houses which meet the conditions to be considered a residential building will follow the VAT treatment of a residential building; this will typically require that a person occupies the building as their principal place of residence;
  • Other farm buildings not used as the principal place of residence will be considered commercial buildings and standard-rated for VAT; this includes farm houses which are used as weekend homes only;
  • Farm land which is considered ‘covered’ with buildings or civil engineering works will be standard-rated for VAT;
  • Farm land which is considered to be bare land (without buildings or civil engineering works, including in-built irrigation) will be exempt from VAT; and
  • The supply of the farm as a whole must be considered according to the rules regarding composite or mixed supplies; any consideration must be apportioned appropriately where applicable.

The VAT treatment of a supply of a farm as a whole, comprising both commercial land, commercial buildings and residential buildings, should be considered on the basis of whether it is a single composite supply (and therefore subject to the VAT liability of the principal component), or whether it is a mixed supply (and therefore the individual components are subject to different VAT treatments).  In order to determine the correct VAT liability, each case will need to be considered on a case by case basis because the fact patterns will differ.