When it is possible to apply theReduced VAT on building renovations? The rate drops to 10% – from the ordinary 22% – for the provision of services directly connected with building recovery interventions, ordinary and extraordinary maintenance. It is necessary, however, that the interventions are carried out on of properties predominantly for residential use.
When managing building renovation works, one of the most delicate cases to manage is that relating to the application ofVAT reduced at 10%. This particular rate has a very specific purpose: to support the construction sector. By introducing this benefit, the legislator wanted to support the maintenance or renovation of properties when they are mainly intended for residential purposes. This does not mean that, over time, some doubts have arisen regarding the scope of application of this benefit and what steps must be taken to benefit from it.
Building renovation, when the 10% reduced VAT is due
The application of the reduced VAT at 10% instead of the ordinary one at 22% was provided for directly by thearticle 7, paragraph 1, letter b) of Law no. 488/99. It is possible to access this particular benefit for ordinary and extraordinary maintenance interventions which are carried out on properties mainly intended for private residential use.
Therefore, works carried out on properties which have a non-residential destination and which, therefore, fall into a cadastral category different from those from A/1 to A/9 And A/11.
To be able to benefit from the 10% reduced VAT it is necessary to have signed a contract.
The procurement contract
It is important to underline that thereduced VAT rate of 10% is exclusively for the provision of services. It does not also apply to other operations which concern, for example, the sale of goods, such as, for example, the sale of windows. However, it may happen that the procurement contract refers to:
- at provision of services;
- topurchase of the necessary materials.
When this situation occurs – i.e. when the contractor supplies goods of significant value – the VAT rate must be applied in a reduced form. But only up to the value of the service considered net of the value of the goods themselves. The limit of this value must be identified by subtracting thetotal amount of the benefitwhich corresponds to the entire amount due by the client, al value of significant assets.
Goods to which reduced VAT does not apply
Basically theVAT reduced at 10% can be applied to a series of finished products, which do not include, for example, products attributable to the bathroom furniture and accessories families. Or like household appliances. When you purchase a heater, ordinary VAT must be applied.
Furthermore, the 22% rate must also be applied when raw materials are sold, such as cement or semi-finished products, such as tiles. Even when the aforementioned products are used for interventions in non-luxury properties or for subsidized interventions for the recovery of building heritage.
Significant goods and VAT reduced at 10%
Come on significant assetstherefore, it is possible to apply theVAT reduced at 10%. This rate must be applied exclusively to the difference that exists between the overall value of the service and the overall value of the same goods.
In operations, therefore, it is important go and separate the value of significant assets:
- a part of the amount appears to be subject to VAT reduced at 10%;
- how much remains is discountedordinary rate at 22%.
Through the resolution no. 25/E/2015the Revenue Agency has clarified that the value of the raw and semi-finished materials – as well as the other goods necessary for the execution of the works, which are supplied directly as part of the subsidized service – must not be identified independently, but it will go to flow into that foreseen for manpower.
What does all this mean? Basically, when operations are carried out ordinary and extraordinary maintenance worksthe reduced VAT must also be applied to goods that have been supplied directly by the installer.
Let’s go into a little more detail and give an example: in case you need to install a heating system and the water heater is supplied directly by the company carrying out the work, it is possible to benefit from theVAT reduced at 10%. If, however, the boiler is purchased directly from the customer, the VAT is equal to 22%.
Labor, raw materials and semi-finished products always benefit from the 10% rate. Wanting to summarize as much as possible, the following services do not appear to be subsidisable:
- the supply of goods for the implementation of ordinary and extraordinary maintenance interventions by subjects other than those who carry them out;
- any services that are provided under subcontracting;
- when the services are carried out by professionals.
Finished goods, how supply works
In addition to finished goods, the reduced VAT rate can also be applied to those goods which, although incorporated into the construction, continue to maintain their own individualityas they are, for example:
- doors;
- external fixtures;
- sanitary ware;
- boilers.
In this case the relief is available both when the purchase was made directly by the client for the works, and when the goods were purchased directly from the company or contractor who carries them out.
VAT reduced at 10%, to which properties it applies
L’VAT reduced at 10% applies to properties predominantly for private residential use. Specifically, we refer to real estate units that have been classified as residential and fall into the cadastral categories from A/1 to A/11. With the sole exclusion of the A/10.
The benefit is available regardless of whether the property is actually used. and above all it does not appear to be relevant whether there is a residential, non-residential or promiscuous occupation within it. The relief also applies to the relevant appurtenances.
It is also possible to access the benefits for entire buildings with more than 50% of the surface area of the floors above ground intended for private residence. And for any interventions carried out on the condominium parts.
