6% VAT on the renovation of your home: find out if you are eligible
Are you going to carry out renovation work on your home? Find out if you are entitled to benefits and incentives.
It is already known that transfers of goods and services provided within the national territory that are carried out for consideration by a taxable person are subject to VAT.
In fact, once the incidence, objective and subjective, of this tax has been determined, the operations mentioned above are (generally) subject to taxation at the (normal) rate of 23%, and, if certain requirements are met, the intermediate rate of 13%, or other situations to which the reduced rate of 6% applies.
So... what tax rate should be applied to rehabilitation works in urban rehabilitation zones? Maximum rate of 23% or reduced rate of 6%?
If you don't know, find out... the legislator decided to tax, at a rate of 6%, “Urban rehabilitation contracts, as defined in a specific diploma, carried out in properties or public spaces located in urban rehabilitation areas (areas critical urban recovery and reconversion, intervention areas of urban rehabilitation companies and others) delimited in legal terms, or within the scope of requalification and rehabilitation operations of recognized national public interest”.
In other words, yes, construction projects in areas classified by municipalities as urban rehabilitation areas pay 6% VAT.
The reduced rate is applied to the overall value of the budget, that is, to the services provided and materials used, and is a way of encouraging the rehabilitation of, in many cases degraded, urban centers.
Briefly, the assumptions for obtaining this benefit are:
Urban rehabilitation contracts, as defined in a specific diploma;
Contracts carried out on properties or in public spaces;
Located in urban rehabilitation areas (critical areas of urban recovery and conversion, intervention areas of urban rehabilitation companies and others) delimited in legal terms, or within the scope of requalification and rehabilitation of recognized national public interest.
Is some type of recognition necessary?
The application of the reduced rate does not require recognition by the AT, and no special procedure is necessary if the taxpayer has elements that prove that the work complies with the provisions of the DL. No. 307/2009, of 23/10, for example a declaration from the City Council attesting that the property is located in ARU, for the purposes of VAT at a reduced rate.
What should appear on invoices?
In addition to the requirements referred to in paragraph 5 of art. 36 of the CIVA, a reference must be made to the works contract and the location of the work, for the purposes of applying amount 2.23 of List I attached to the CIVA.
What about projects outside rehabilitation zones? Will they be entitled to 6% VAT?
Yes, requalification works outside the ARU can also benefit from VAT at 6%. However, for this measure to be applied, there must be a contract established with the Institute of Housing and Urban Rehabilitation (IHRU) or they must be integrated into special financial or fiscal support regimes for the rehabilitation of buildings.
For this purpose, contracts for the rehabilitation of properties outside the ARU must be contracted directly to the National Building Rehabilitation Fund by its management company, or by the Institute of Housing and Urban Rehabilitation, I. P. (IHRU, I. P.) and carried out at the under special financial or fiscal support regimes for the rehabilitation of buildings or under programs financially supported by IHRU, I. P..
