VAT treatment of services connected with Immovable Property.

1. General

Directive 2008/8/EC, amended the VAT Directive 2006/112/EC with effect from 1 January 2010 introducing new rules for determining the place of supply of services for VAT purposes. Details of the new rules are set out in the Information Leaflet - New Intra-Community VAT Rules on Place of Supply for Services issued in December 2009.

While the VAT treatment of services connected with immovable goods are covered in Par. 2.8 of that leaflet this leaflet gives more details on the practical application of those rules.

Article 47 of Directive 2006/112/EC, as amended, governs the place of supply of services connected with immovable property. That Article provides that the place of supply of services connected with immovable property is the place where the immovable property is located.

Immovable property means land and any buildings or fixtures attached to the land, including tenements, hereditaments, house buildings, walls, fences, other permanent structures or fixtures such as pipeline systems for gas, water, sewage etc, land covered by water, and any estate interest in, or over, land.

2. Services directly connected to immovable property

The specific rule concerning the place of supply of services relating to property only applies where the service supplied is directly related to a specific property. It does not apply if the service involved has only an indirect connection with land or if the land related service is only an incidental component of a more comprehensive supply of services. See further information on this point at Par.6, below

3. Legal basis

Currently the domestic legal basis for the rules on the supply of services connected to immovable property is contained in Sections 34 (c) and 33 (2) (a)(b) and (c) of the VAT Consolidation Act 2010. The text of those provisions is as follows;

Section 34 (c) -if the supply of services is connected with immovable goods, or is the grant of a right to use those goods, the place where those goods are located,

Section 33 (2) - In Section 34(c) a supply of services connected with immovable goods includes-

a supply of services by experts or estate agents,
a provision of accommodation in a hotel or guesthouse or in an establishment having a similar function, or in a holiday camp or in a site developed for use as a camping site and,
a supply of services involving the preparation and coordination of construction work (including supply of services of architects and of persons who provide on- site supervision)

These three areas are explained in more detail as follows;

3.1.1 Supplies of services by experts and estate agents.

In the context of the way Section 33(2) VAT Consolidation Act 2010 is written the services of experts and auctioneers are set out quite separately from services which have a very clear input into the pre- construction, actual construction or post construction process. Therefore the word expert in Section 33 (2)(a) has to be interpreted as referring to persons supplying services connected with immovable property other than those persons supplying the services outlined in detail at 3.3 below which involve construction related services requiring an onsite role in the provision of those services.

Examples of services in this category are auctioneers and estate agents who are referred to specifically and also included, for example, are interior designers, persons supplying storage facilities, and property management companies.

It has to be said that the distinction drawn between these service providers and those mentioned in Par. 3.3 as having an onsite role in the construction process is relevant only for the purposes of the application of the reverse charge mechanism covered in the next Par. 3.1.2

3.1.2 Reverse change mechanism applicable in the case of services supplied by certain foreign service providers

While in general the place of supply of services connected with immovable goods is the place where those immovable goods are located Ireland has availed of a provision in the 2006 VAT Directive in Article 194, now provided for in Section 12 (2)(a) VAT Consolidation Act 2010 where a MS can, in certain circumstances, relieve a service provider who is established outside the State, but who is supplying services in the State, from having to register for VAT here. Therefore if a taxable person who carries on a business in the State or a Public Body receives a service connected with immovable goods, excluding those services referred to in Pars. 3.2 and 3.3 below, then the foreign supplier of the service will not have to register for VAT in the State and the taxable person or the Public Body will be responsible for accounting for the VAT on a reverse charge basis. It is anticipated that this reverse provision, in these circumstances, will have limited application.

It should be noted that where a foreign service provider supplies services connected with property in the State to non- taxable persons those service providers will always be obliged to register for VAT in the state.

3.2 Hotel Accommodation

The place of supply of hotel accommodation or the provision of services in similar functions such as camping sites services will always be where the hotel, camping site, or other accommodation is located.

3.3 Construction and related services

Actual construction operations will include construction, demolition, conversion, reconstruction, alteration, enlargement, repairs or maintenance, of a building or civil engineering development. These operations are taxable where the immovable property is located but services directly connected with the pre-construction, construction, and development of immovable goods, where the nature of the services require the suppliers to be involved in actual on- site activities, are also included. Thus included are all building and construction service providers, architects, which are specifically mentioned, engineers, surveyors, decorators, site supervisors, and other service providers where the supplier has a specific onsite function concerning a specific property.

Suppliers of these services must register and account for VAT in the state in respect of the services they supply where those service are directly connected with immovable property here.

4. Irish suppliers providing services directly related to property.

A service provider based in Ireland who supplies services directly connected to a property located in another MS of the EU may have an obligation to register and account for VAT in that MS. These service providers may register for VAT in the state and claim input credit in connection with taxable activities carried on both within and outside the state. Any Irish supplier who believes that they have an obligation to register for VAT in another MS of the EU should confirm that with the appropriate authorities in that MS.

5. Foreign suppliers providing services directly related to property

Foreign suppliers coming under Par 3.3 above and who supply services directly connected with specific property located in the state will be obliged to register for VAT here. It should be noted that no registration threshold in applies in such cases and the reverse charge mechanism referred to in Paragraph 3.1 above whereby the customer (a taxable person) accounts for the VAT has no relevance for these suppliers.

However the existing arrangement provided for in Section 16 (3)(b) Value Added Tax Consolidation Act 2010 whereby a principal contractor, as defined, accounts for VAT on services connected with immovable goods received from a subcontractor, who is established outside the state, will continue. In these cases the foreign subcontractor will not be obliged to register for VAT here and the main contractor will be responsible for any VAT due.

For further information please see the following VAT Information Leaflets;

Construction Services New Rules

Reverse Charge

6. Following discussions at EU level it has been generally agreed that the following services are covered by Article 47 2006 VAT Directive (Sections 33(2) and 34( c) VAT Consolidation Act 2010). Therefore the services are taxable where the immovable property or structure is located.

Construction of or demolition work on, a building or of other permanent structures such as pipeline systems for gas, water, sewage and the like;
The drawing up of plans for a building or parts of a building designated for a particular plot of land regardless of whether the building is erected;
The provision of on site supervision and construction work performed on a building or parts of a building or on land;
The renovation and repair of a building or parts of a building, including work such as cleaning, tiling, papering and parqueting;
The installation or assembly of equipment which, upon installation or assembly, becomes part of an immovable property;
The provision of on site (not remotely supplied) supervision and security services;
The repair and maintenance, inspection and supervision of equipment if the equipment is part of an immovable property;
Work on land including agricultural services such as tillage, sowing, watering, and fertilisation services;
The provision of accommodation in the hotel sector or sectors with a similar function such as holiday camps or sites developed for use as camping sites including the right to stay in a specific place resulting form the conversion of timeshare usage rights and the like;
The valuation of immovable property, including where such service is needed for insurance purposes, to determine the value of a property as collateral for a loan, or to assess risk and damages in disputes;
Intermediation in the sale or letting of immovable property;
Legal services relating to the conveyance or the transfer of a title to immovable property, such as notary work, or the drawing up of a contract to sell or acquire such property, even if the underlying transaction resulting in the legal alteration of the property is not carried through;
The assessment of the risk and integrity of immovable property;
The leasing or letting of immovable property, including the storage of goods for which a specific part of the property is designated by the owner for use of the customer;
The assignment of other rights to use the whole or parts of an immovable property, including the transmission of such rights, provided that the property is a constituent element of the supply;
The provision of a stand location on a fair or exhibition site not accompanied by other related services such as electricity, stand design, transport, storage, provision of machines, cable laying ,insurance, and supply of publicity material.
Property management, other than management of a portfolio of investments in real estate, consisting in the operation of commercial industrial or residential property by or on behalf of the owner of the property;
The assignment or transmission of rights to use property including licences for using part of the property, granting of fishing or hunting rights, access to airport lounges or the use of infrastructure such as bridges or roads where a toll is paid.

7. Following discussions at EU level it has been generally agreed that the following services are not covered by Article 47, 2006 VAT Directive, (Sections 33(2) and 34 ( c) VAT Consolidation Act 2010). The place of supply of these services is dealt with under the general place of supply rules. Where such services are supplied to taxable persons the place of supply will be where that taxable person is established. Where such services are supplied to non- taxable persons the service will be liable to VAT where the supplier is established.

The letting of property or part of a property for the purposes of advertising;
Advice and information relating to land prices or property markets which do not relate to specific properties;
Feasibility studies of the commercial potential of development etc. in a geographical area;
Legal or estate agents fees for services that do not relate to specific properties.
The drawing up of plans for a building or parts of a building if not designated for a particular plot of land;
The installation or assembly, the repair and maintenance, the inspection or the supervision of machinery which is not, or does not become, part of the immovable property;
The hiring out of equipment for use on building sites;
The making available of equipment, together with staff qualified to operate the equipment, for a customer carrying out work on immovable property where the customer is responsible for carrying out the work.;
Legal services connected to contracts, including advice given on the terms of a contract to transfer immovable property, or to enforce such a contract, or to prove the existence of such a contract, where such services are not specific to the transfer of a title on an immovable property.
The storage of goods if no specific part of an immovable property is designated by the owner for use of the customer;
The provision of a stand location on a fair or exhibition site where accompanied by other related services such as electricity, stand design, transport, storage, provision of machines, cable laying ,insurance, and supply of publicity material.

8. Rates of VAT

Services consisting of the development of immovable goods are liable to VAT at the reduced rate, subject to the two third rule.

For more information on the application of the two-third rule please see Guide to Value-Added Tax 2008

Professional services connected with property such as legal, auctioneers, architects,surveyors etc. are liable to VAT at the standard rate.

9. Records

A VAT registered trader must keep records of all business transactions, which affect or may affect his or her liability to VAT and entitlement to deductibility. The records must be kept up to date and must be sufficiently detailed to enable a person to accurately calculate liability or repayment and also to enable Revenue to verify the veracity of the underlying transactions, if necessary.

10. Examples

Practical examples of various transactions and the appropriate VAT treatment applicable to those transactions are contained in the Annex to this leaflet.

11. Further information

Further information on this leaflet can be got from the local Revenue District dealing with a persons tax affairs. Details of offices are on our website Contact Page.

This Leaflet is issued by:

VAT Interpretation Branch,
Indirect Taxes Division,
Stamping Building,
Dublin Castle.

May 2012

ANNEX – Examples - VAT treatment of services connected with immovable property. Irish service providers referred to in the examples below are regarded as registered for VAT in the State.

Example 1

Irish building contractor is engaged to supply construction services in the UK.

As the place of supply is the UK the Irish building contractor may be obliged to register for VAT there and charge UK VAT. He will be able to recover any VAT on inputs incurred in Ireland in connection with that activity.

Example 2

An Irish architect is engaged to supply services in connection with the refurbishment of a specific building in France.

The place of supply of the service is France and the architect may have to register for VAT there and charge French VAT. He will be able to recover any VAT on inputs incurred in Ireland in connection with that activity.

Example 3

An Irish auctioneer is engaged to sell a specific property in France.

Example 4

An Irish auctioneer is asked by a non-taxable person based in Ireland or abroad to give general information on holiday property availible in a region of Italy.

As the information does not relate to specific property then the place of supply of the services is where the auctioneer is established and Irish VAT will be charged in both instances.

Example 5

A company based in Ireland or abroad asks an Irish auctioneer to give general information on office property available in a region of Germany.

As the information does not relate to a specific property then the place of supply follows the general rule. In the case of a supply of the service to a taxable person based in Ireland Irish VAT is charged. In the case of the supply of services to a taxable person based outside Ireland no Irish VAT will be charged and the recipient, based within the EU, will have an obligation to account for any VAT due on the reverse charge basis.

Example 6

A UK building contractor is engaged to carry out construction work on a specific building in the State. He will act as the main contractor.

Place of supply of the construction service is Ireland and the UK construction firm must register for VAT here. No registration threshold applies in such cases.

Example 7

A contractor acting as a main contractor supplies construction services to a client in Ireland and is registered for VAT here. He engages subcontractors from the UK.

The place of supply of the subcontractors services is in Ireland but they will not have to register for VAT here. Instead the main contactor will account for the VAT due on the reverse charge basis. (See Section 16 (3)(b) Value Added Tax Consolidation Act 2010.)

Example 8

A French architect is engaged to work on a specific building in Ireland.

The place of supply of the service is Ireland and the French architect must register here and Irish VAT should be charged. No registration threshold applies.

Example 9

A French architect is engaged by an Irish developer to supply drawings for a development that the developer may undertake, in as yet unnamed location, in the future.

As no specific building is involved the property specific rule does not apply and the VAT treatment is treated by reference to the general place of supply of services rules. As the developer is a taxable person based in Ireland he will account for the VAT on a reverse charge basis and the architect will not have to register for VAT here.

Example 10

A UK interior designer is engaged by a taxable person in Ireland to supply design services involving a specific building here.

Even though a specific building is involved the UK interior designer does not have to register for VAT here. The customer who is a taxable person will account for Irish VAT under the reverse charge mechanism (See Paragraph 3.1.2 above.)

Example 11

The same UK interior designer is engaged by a private individual to supply design services for a specific domestic dwelling in Ireland.

As the recipient of the service is a non- taxable person the interior designer should register for VAT here and no registration threshold applies.

Example 12

Fred, an Irish solicitor, is engaged to carry out Irish legal work in connection with the administration of an estate by Lucy, a private individual resident in San Diego, California, USA who is the personal representative of a person who died domiciled and resident in Co. Kerry. The estate includes a 500-acre farm in Co. Kerry.

The service which Fred supplies to Lucy is not directly connected with immoveable property. Fred does not charge VAT on his legal services to Lucy.

Had Fred supplied such services to a private person resident in the EU, he would be obliged to account for Irish VAT on his fees.

Example 13

As part of his legal services described in Example 12, Fred acts for Lucy, the personal representative, in legal proceedings relating to a claim against the estate for a right of way through the farm.

Again, as the services are not directly connected to immovable property, Fred does not charge VAT on the fees which he charges to Lucy for acting in such proceedings.

Example 14

Barbara, an Irish solicitor is instructed by Bruce, an Australian resident, to take proceedings against Brendan, an Irish personal representative, in respect of a claim by Bruce for an interest in the estate of Sorcha, a deceased Irish resident person which estate includes an office building in Galway. Barbara will not charge VAT on the fees invoiced to Bruce.

Example 15

Rosemary, an Irish solicitor, acts in the sale of a holiday home at Spiddal for Richard, a Canadian resident. Rosemary is accountable for VAT on the fees charged to Richard.

Revenue Information Note