VAT in construction – why is it 9.5% once and 22% on other times?
Do you plan to do business in Europe? Construction business is very popular in Slovenia and EU. VAT in construction is specific, as this activity is subject to very special taxation rules. Once a reduced rate is applied, once a general rate is used. In certain cases there is no taxation in Slovenia at all. You can use the reduced VAT rate for the construction and the repair of residential buildings. But the general one you can use for the business buildings.
According to the ZDDV-1, the place of construction is mportant
Most services are generally governed by the fact that they are taxed where the contractor is established. In the case of construction, Article 27 of the Value Added Tax Act (ZDDV-1) provides for a special feature. It states that the place of taxation is where the real estate stands. The VAT in construction for real estate not located in Slovenia, ie the place of taxation is not Slovenia. All taxpayers must check their obligations in the country where the real estate is located.
The reduced VAT rate in construction
VAT in construction at a reduced rate, 9.5 percent is charged on the basis of 11th and 11a. points of Annex I, ZDDV-1. The Articles 54 and 54a of the Rules on the Implementation of ZDDV-1 prescribe detailed explanations of the application of the reduced VAT rate in construction . There we understand that the provision applies only to the taxable persons performing an activity falling under code F / Construction.
The purchase of a new building can also fall under the taxation at the reduced rate. But the size of the apartment may not exceed 120 m2. In case of a residential house it cannot be bigger than 250 m2 of usable area. This is when the building is part of a social policy.
The transfer of the VAT liabilities
Another special feature applies to the calculation of VAT in construction, namely the transfer of the obligation to calculate the VAT to the recipient. According to Article 76.a of ZDDV-1, you must payy VAT by a taxable person who identifies or VAT purposes in Slovenia and to whom supplies are made by another Slovenian taxable person:
- construction work, including the repair, cleaning, maintenance, reconstruction and demolition relating to real estate;
- the intervention of staff involved in the activities referred to in the previous indent;
- the supply of real estate if the supplier has decided to tax in accordance with Article 45 of ZDDV-1.
Of course, the real estate must also be located in Slovenia. In this case, the recipient of the service performs the self-taxation They show it separately in the VAT return. The contractor only displays VAT on the issued invoice in construction. But they do not charge it, so the buyer does not pay it. Do you want to learn more about this topic? Follow our Facebook and Instagram for more useful tips.