How is real estate work carried out in an EU Member State taxed? What are the VAT rules for building renovations, construction sites, electrical work or earthworks? When should you appoint a fiscal representative or tax advisor ? When should you appoint a fiscal representative or tax advisor ?
A summary by the experts
A specific VAT rule applies to works concerning “building related services,” according to a rather broad definition (see example below).
For all these “building related services”, the following rule applies: VAT is due in the place where the building is located. A service provider working on a building will therefore have to charge VAT on their services in the Member State where the building is located.
The notion of building is very broad when it comes to VAT regulations; here are some examples of “building related services”:
- VAT & renovation or demolition of a house or building
- VAT & services of experts and real estate agents
- VAT on renting a house, an apartment, a building or a room
- VAT & the services of architects, surveyors, works coordinators, design offices, etc.
- VAT & earthworks.
- VAT, electrical and plumbing work
- VAT & building cleaning services
- VAT & on-site caretaker, surveillance and security services for buildings
- VAT & garden landscaping
- VAT & drilling
Examples of VAT obligations linked to building related services
Building related services
For this property renovation service, you are required to register for VAT in France.
You have to pay VAT in France on these building renovation services.
Procuring subcontractors for services building related services
As a general rule, your French and Italian subcontractors should charge you including French VAT because they are also performing a service on a building located in France. This VAT is deductible on the VAT returns that you will have to file in France. However, in the particular case of France, as in certain other Member States, the local rule requires your subcontractors to invoice you excluding VAT. You will then be liable for VAT on any subcontractor purchases you make attached to buildings.
How do you manage your purchases of materials in Germany (Intra-Community acquisitions)? Here also, you have to register for VAT in France, because VAT is due in France on these Intra-Community acquisitions.
How do you manage your purchases of materials from Turkey (imports)? Here again, you must be obtain a VAT number in France because VAT is due in France on these imports.
These examples are given to clarify VAT mechanisms and explain your obligations. It is worth checking the regulations for your particular transactions in line with the law, doctrine and practices in each of the EU member States. Contact us for more information!
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A tax advisor or fiscal representative can help you understand the local rules clearly, register for VAT and manage your obligations in the country where you carry out any building related services.
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European regulatory references
“The place of supply of services connected with immovable property, including the services of estate agents and experts, and services for the preparation and coordination of construction work, such as the services of architects and of firms providing on-site supervision, shall be the place where the property is located.”
Source: Article 45 of Directive 2006/112/EC
1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number:
(a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199;
(b) every taxable person, or non-taxable legal person, who makes intra-Community acquisitions of goods subject to VAT pursuant to Article 2(1)(b) and every taxable person, or non-taxable legal person, who exercises the option under Article 3(3) of making their intra-Community acquisitions subject to VAT;
(c) any taxable person who, within their respective territories, makes intra-Community acquisitions of goods for the purposes of his transactions which fall within the activities referred to in the second subparagraph of Article 9(1) and which he carries out outside those territories;
(d) every taxable person who receives, within their respective territories, supplies of services for which he is liable to pay VAT pursuant to Article 196;
(e) any taxable person who is established within their respective territories and who, within the territory of another Member State, supplies services for which only the customer is liable to pay VAT pursuant to Article 196.
2. Member States need not identify certain taxable persons who carry out transactions on an occasional basis, as referred to in Article 12.
Source: Article 214 of Directive 2006/112/EC
1. Member States may provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made:
(a) the supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, as well as the handing over of construction works regarded as a supply of goods pursuant to Article 14(3);
Source: Article 199 of Directive 2006/112/EC
For all European Union countries and some third countries.
For all European Union countries and some third countries. For all your VAT, Intrastat & ESL obligations, and your VAT recovery requests.