NB:  The content in this article is only updated as of 22 January 2015.  

Are Joint Management Bodies and Management Corporations a ‘business’?

Some have tried to argue that residential Joint Management Bodies (JMB) and Management Corporations (MC) are non-profit organisations and do not conduct commercial activities (ie, not a business).

Newsflash. If one uses a layman’s understanding of the word ‘business’ to the GST world without actually looking  up the relevant laws, one might find himself sorely disappointed or worse, audited and heavily penalized.

The fact that the term ‘business’ under the GST Act has an entire section 3 dedicated to it (as opposed to being bunched together with the other lesser terms under the interpretation section) is revealing. In short, yes, what the JMB/MC does is a business. Here is why.

Firstly, that ‘JMB’ and ‘MCs’ are expressly deemed to be carrying on ‘business’ under the Act. End of argument, really.

For GST purposes, ‘business’ does NOT depend on whether the activity is done for pecuniary profit. Even non-profit organisations have to play by the GST rules.

Here are some criteria issued by Customs to assess whether a person/body conducts a ‘business’ for GST purposes:

  • It is a serious undertaking or work earnestly pursued;
  • It is pursued with reasonable or recognisable continuity;
  • It is conducted in a regular manner and on sound and recognised business principles (of a business like nature);
  • It is predominantly concerned with making supplies for a consideration;
  • It is making supplies of a kind commonly made by commercial organisations.

Applying the above to JMB/MCs and if one even understands what a JMB/MC does on a day to day basis, all doubt is removed. The argument that such activities are likened to ‘running one’s own household’ and therefore not ‘business’ simply does not hold water.

Exempt or Zero rated – What’s the real impact on maintenance fees?

Both GST exempt and zero-rated status appear to have the same effect on maintenance fees on the surface – ie, should not result in an immediate blanket increase of fees to the proprietor.

However, under GST exempt status, the JMB/MC will be absorbing the input GST imposed on them by other service providers. This translates to higher operating expenses in the JMB/MC’s budget.

Depending on how the budget is balanced, the JMB/MC may decide to pass on a portion of this added cost onto the proprietors through increasing the maintenance fees.

However, a responsible JMB/MC should not just slap a 6% increase on the gross maintenance fee, but instead determine a fair increase based on how much the operating costs are actually impacted by input GST. Afterall, the JMB/MCs will need to justify the figures in order to obtain the necessary votes from proprietors at the AGM for an increase in maintenance fees.


Exempt status will mean that the JMB/MC pays input GST on services it receives, but such input tax cannot be claimed or refunded. In short, the JMB/MC absorbs the input GST as the final consumer.

Timing-wise, GST on inputs will be payable to Customs depending on when the service is performed or when the invoice is issued. This may result in additional cashflow burden on the JMB/MC, especially those that already face poor collection rates of maintenance fees from their proprietors.

On the other hand, zero rated status will alleviate this cashflow problem slightly, as the input GST paid can be refunded.

Overall, whether GST exempt or zero rated, there will be added pressure or motivation on JMB/MCs to step up on their collection of maintenance fees against recalcitrant proprietors.

Perhaps the majority of responsible residents who pay their maintenance fees dutifully may be better off by channelling their efforts towards ensuring that recalcitrant proprietors pay up their maintenance fees, and not burden the responsible majority further in terms of cashflow and uncollected fees.

Compliance costs

Exempt status means the JMB/MC does not need to register for GST and comply with the reportings. This might save the JMB/MC on ongoing compliance costs – accounts staff, GST compliant software, monthly or quarterly filings, potential audits.

Zero rated status means that the JMB/MC will need to be registered and play by all the rules in the GST regime in order to claim input tax credits paid.

Transparency and Accountability

One often neglected benefit of GST is the increased transparency and accountability in terms of financial reporting and financial management that an organization will enjoy once it enters the GST system.

Companies and organizations that are forward thinking view GST as an opportunity to get their act together. Painful and tedious, but still an opportunity. This includes reviewing suppliers, contract terms, upgrading software, training of staff, strengthening reporting structures and so on.

Perhaps for the truly concerned proprietors, more effort should be spent to ensure that their appointed JMB/MC lives up to a new and higher standard of accountability, which in some cases might significantly outweigh the inconvenience of GST.

Personal thoughts

It is not unusual for GST to be imposed on maintenance fees for stratified properties. This has been the case in many other countries with GST/VAT. As much of a pinch as residents/proprietors may feel, this is part and parcel of the new GST environment.

If the proprietors of these strata properties were as concerned about how well their JMB/MCs run the property and how well their money is spent on a daily basis, the imposition of GST, in the grand scheme of things, should not cause them sleepless nights.

On the contrary, they might actually benefit from this change.


About the Author: Shawn Ho is a partner of Donovan & Ho.  He is experienced in corporate matters such as acquisitions, cross-border transactions, restructuring exercises, sale of businesses, joint venture arrangements, shareholder agreements, and franchise businesses. His background in tax advisory has enabled him to assist several multi-national companies achieve considerable tax-savings through cross-border tax planning, implementing tax-efficient structures using Labuan companies, and incorporate tax advice into commercial transactions.

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