If you are entering the world of renovations and are starting to investigate trends, costs, etc., you have surely noticed that one of the most common doubts is to know what the VAT of the renovation is. What is the VAT of a renovation, 21% or 10%?
Depending on the particularities of the project, we can differentiate between two types of renovation works:
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The rehabilitation works
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Renovation and repair works
What is the VAT of a renovation in renovation works?
Rehabilitation work is understood when more than 50% of the total cost of the project corresponds to consolidation or treatment works of structural elements, facades or roofs or to works similar or related to those of rehabilitation. Textually, article 91.one.3 of the VAT Law establishes that:
“One. The rate of 10 per cent shall be applied to the following transactions
(…)
3. The following operations:
1º The execution of works, with or without the contribution of materials, as a result of contracts directly formalised between the developer and the contractor that have as their object the construction or rehabilitation of buildings or parts thereof intended mainly for housing, including the premises, annexes, garages, installations and complementary services located therein.
That more than 50 per cent of the total cost of the rehabilitation project corresponds to works of consolidation or treatment of structural elements, facades or roofs or to works analogous or related to those of rehabilitation.”
- Works analogous to those of rehabilitation.
a) Those of structural adequacy that provide the building with conditions of constructive safety, so that its stability and mechanical resistance are guaranteed. b) Those for the reinforcement or adaptation of the foundations, as well as those that affect or consist of the treatment of pillars or slabs. c) Those for the extension of the built area, above and below ground. d) Those for the reconstruction of facades and interior courtyards. e) Those for the installation of lifting elements, including those intended to overcome architectural barriers for use by the disabled. In conclusion, this should not be a problem for us, because if our renovation is not considered a rehabilitation work, we can always include it as a renovation and repair work that covers other requirements.
And what happens to VAT if they are renovation and repair works
As we mentioned before, if our work is not among the characteristics of a rehabilitation as such, we can include it as a renovation and repair work, since the work to be carried out is the usual in the renovation of any home, including: masonry, plumbing, carpentry, electricity, painting, etc. (before April 14, 2010, the reduced rate was limited to masonry works only).
To find out what the VAT of the reform is, following the same article 91 of the VAT Law, this time section One.10, when a work cannot be classified as rehabilitation we can consider it renovation and repair works and thus be able to apply VAT at 10% if:
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That the building is intended for housing.
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That the recipient is a natural person, does not act as a businessman or professional and uses the dwelling to which the works refer for his or her private use.
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At least 2 years have passed since the home in which the renovation is to be carried out was previously built or rehabilitated .
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That the cost of the materials does not exceed 40% of the total amount of the work (excluding VAT). It is very convenient to justify this point to have a very detailed budget, a task that can be taken care of by the architecture studio. If we use high-cost materials or qualities in a renovation, this requirement may not be met.
Example:
The laying of the floor of a house for €10,000, corresponding to €3,000 to materials provided by the person carrying out the work, is taxed at the reduced rate of 10%.
A work for a total amount of €10,000, if the materials provided amount to €5,000, will be taxed, however, at the general rate of 21%.
What VAT is on the materials necessary for a renovation.
When the sale of kitchen and bathroom furniture, built-in wardrobes and other materials is included in the renovation, these materials must be provided and installed by the company in charge. If we acquire them ourselves and take care of installing them later, we will effectively face a VAT of 21%.
Household appliances, however, will be taxed at the general rate of 21%, although they are supplied and installed by the company in charge of renovating the home.
To be clearer, it should be borne in mind that in order to apply the 10% VAT, the following rules must be met:
- That the customer invoices in the name of an individual and not a company.
- That the use is of a private nature (if we use the renovation of the home to rent it, VAT of 21% would have to be applied). In order for the VAT on the renovation to be reflected correctly, the company in charge of carrying out the renovation must request a written document from the owner of the property certifying that thehome is used for their private use.
- That the home is more than 2 years old.
- That the cost of the materials does not exceed 40%.
For this last point, it is very convenient to have professional advice and a detailed budget.
Thinking of renovating your home? At Kaleidoscope we help you from the beginning with our team, we are specialists in comprehensive renovations with our own method that allows you to supervise the entire process constantly, helping to solve any incident. Calculate what would be the investment that a comprehensive renovation would involve for free with our renovation planner tool Finally, if you still have more questions related to VAT and renovations, we leave you a direct link to the tax agency where you can see the most frequently asked questions about it: Frequently asked questions about VAT and Renovations
