Are you self-employed in the construction sector? If so, watch out when indicating the VAT rate on your invoices. As you probably know, the rate is 21% for new constructions and 6% for renovation work. However, this reduced rate of 6% is subject to certain conditions and only applies to individuals. Another tip: think about using the ‘VAT co-contractor’ regime (reverse charge) if your (end) client has a VAT number. This article explains everything about the VAT rates to apply in construction.
VAT rates for private clients
Are you carrying out work for a private client? Generally speaking, you’ll be applying a VAT rate of 21%.
Is the building at least 10 years old and is primarily intended for residential use? In this case, you can carry out most renovation work at a reduced VAT rate of 6%. Any work involving the transformation, repair and maintenance of a property is considered ‘renovation’.
This reduced VAT rate of 6% is, however, subject to certain conditions:
- The building is at least 10 years old;
- The end client is a private individual;
- You supply and place the materials yourself (DIYers who do the work themselves still pay 21% on building materials);
- You invoice the end client directly;
- Most of the existing load-bearing walls are preserved.
The 6% VAT rate also applies to the installation of a heat pump, solar panels or a solar water heater.
Exceptions
Certain work is excluded from the 6% regime:
- Cleaning work is not considered as part of renovation;
- Work related to your garden, such as landscaping work (of a terrace, for example), fencing or even the construction of a swimming pool or sauna, are subject to 21% VAT;
- Kitchen appliances and light fixtures that are not fully integrated into the ceiling are subject to 21% VAT;
- When renovating, existing load-bearing walls should be preserved as much as possible. Otherwise, the renovation comes too close to the category of ‘demolition/reconstruction’. And in this case, it can be considered as a new construction, which is subject to 21% VAT.
Source: FPS Finance (page in French/Dutch/German)
Applying the reduced VAT rate of 6% to your invoice
As a contractor or construction professional, you are responsible for the accuracy of your invoices and the VAT rate you apply. When carrying out renovation work, first check with your client whether the various conditions for applying the reduced rate are met.
Previously, the customer had to sign a certificate to confirm this. But this certificate was often forgotten or misplaced, which caused difficulties during a VAT audit. Thankfully, this certificate has since been replaced by a standard note on the invoice. So things are now much simpler.
💡 Accountable tip: Add this note to each invoice involving a reduced VAT rate:
French version:
« Taux de TVA : En l’absence de contestation par écrit dans un délai d’un mois à compter de la réception de la facture, le client est présumé reconnaître que (1) les travaux sont effectués dans un bâtiment résidentiel dont la première occupation a eu lieu au cours d’une année civile qui précède d’au moins dix ans la date de la première facture relative à ces travaux, (2) qu’après l’exécution de ces travaux, l’habitation est utilisée, soit exclusivement, soit à titre principal comme logement privé et (3) que ces travaux sont fournis et facturés à un consommateur final. Si au moins une de ces conditions n’est pas remplie, le taux normal de TVA de 21 % sera applicable et le client endossera, par rapport à ces conditions, la responsabilité quant au paiement des taxes, intérêts et amendes dus. »
Dutch version:
“Btw-tarief: Bij gebrek aan schriftelijke betwisting binnen een termijn van één maand vanaf de ontvangst van de factuur, wordt de klant geacht te erkennen dat (1) de werken worden verricht aan een woning waarvan de eerste ingebruikneming heeft plaatsgevonden in een kalenderjaar dat ten minste tien jaar voorafgaat aan de datum van de eerste factuur met betrekking tot die werken, (2) de woning, na uitvoering van die werken, uitsluitend of hoofdzakelijk als privéwoning wordt gebruikt en (3) de werken worden verstrekt en gefactureerd aan een eindverbruiker. Wanneer minstens één van die voorwaarden niet is voldaan, zal het normale btw-tarief van 21 % van toepassing zijn en is de afnemer ten aanzien van die voorwaarden aansprakelijk voor de betaling van de verschuldigde belasting, interesten en geldboeten.”
English translation (for information only):
“VAT rate: In the absence of a written objection within one month of receipt of the invoice, the customer is presumed to acknowledge that (1) the work is carried out in a residential building first occupied at least ten years before the date of the first invoice relating to this work, (2) that after the execution of this work, the property is used, either exclusively or primarily as private accommodation and (3) that this work is supplied and invoiced to an end consumer. If at least one of these conditions is not met, the standard VAT rate of 21% will apply and the customer will assume, in relation to these conditions, responsibility for the payment of taxes, interest and fines due.”
VAT rates for professional clients
For professional clients who will be using the property for business purposes, you still have to charge 21% VAT, even for renovation work. This may seem like a lot, but the business will be able to reclaim this amount through their VAT return.
Basically, you invoice the VAT and then pay it to the VAT administration, after which your client simply recovers it from the same administration. These unnecessary transactions may seem silly, especially since the amount to be advanced can be significant. Fortunately, there’s a way to avoid this: the ‘VAT co-contractor’ (‘tva co-contractant’ / ‘btw-medecontractant’) system.
VAT co-contractor (reverse charge)
Is your client subject to VAT and are you carrying out work on a property that’s used entirely or partially for professional purposes? In this case, use the VAT co-contractor system to transfer the VAT to your end client.
By using this system, you don’t charge VAT yourself, but you include the following note clearly on your invoice:
French:
« Autoliquidation. En l’absence de contestation par écrit, dans un délai d’un mois à compter de la réception de la facture, le client est présumé reconnaître qu’il est un assujetti, tenu au dépôt de déclarations périodiques. Si cette condition n’est pas remplie, le client endossera, par rapport à cette condition, la responsabilité quant au paiement des taxes, intérêts et amendes dus. »
Dutch:
“Verlegging van heffing. Bij gebrek aan schriftelijke betwisting binnen een termijn van één maand na de ontvangst van de factuur, wordt de afnemer geacht te erkennen dat hij een belastingplichtige is gehouden tot de indiening van periodieke aangiften. Als die voorwaarde niet vervuld is, is de afnemer ten aanzien van die voorwaarde aansprakelijk voor de betaling van de verschuldigde belasting, interesten en geldboeten.”
English translation (for information only):
“Reverse charge. In the absence of a written objection, within one month of receipt of the invoice, the client is presumed to acknowledge that they are a taxable person required to submit periodic VAT declarations. If this condition is not met, the client will assume, in relation to this condition, responsibility for the payment of taxes, interest and fines due.”
Conditions:
- You’re carrying out work on a property used entirely or partially for professional purposes;
- The work in question has been carried out on the part used for professional purposes.
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