When to apply VAT at 22%
The purchase of components of a prefabricated house to be assembled by specialized technicians of the selling company is subject toordinary VAT rate of 22%. In this case, the customer is not buying an actual house, but individual parts thereofwhich will be subsequently assembled.
The Agency’s decision is based on Ministerial Resolution no. 503351 from 1974. According to this resolution, the 22% rate applies when the contract concerns the purchase of parts of a prefabricated house, which will subsequently be assembled, even if the assembly is carried out by the company itself that produces them.
For example, if a customer purchases prefabricated walls and other components for a wooden house from a company, which also offers the assembly service. The object of the transaction is not a complete house, but one supply of partstherefore the applicable VAT is the ordinary one at 22%.
Reduced VAT rates of 4% and 10%: the eligible cases
The reduced rate of 4% or 10% can only be applied if the purchase takes place under a procurement contract for the construction and delivery of a complete house “turnkey”. In this circumstance, the operation is configured as a home sale.
The necessary conditions for the reduced rate they are:
- procurement contract: the company undertakes to build and deliver a complete housenot only to provide prefabricated parts;
- home requirements: the property must have the characteristics required for the application of VAT benefits (for example, main residence or subsidized residential construction).
For example, if a customer entrusts a company with the construction of a complete prefabricated house, with systems, finishes and final turnkey delivery. In this case, the VAT rate can be reduced to 4% or 10%, depending on the specific requirements.
Clarifications on the One Stop Shop (OSS) scheme
The company involved in the sale of prefabricated houses adheres to the optional regime One Stop Shop (OSS). This regime simplifies the payment of VAT for cross-border transactions within the European Union.
The Agency recalls that this regime allows a taxable person to pay VAT relating to the supply of goods or services made to private individuals in a single Member State, the one in which he is identified. Revenue recalls that this is a measure that simplifies the payment of VAT due on cross-border supplies of goods and services.
Penalties for incorrect application of VAT
Incorrect application of VAT rates can result sanctions for the selling company.
It is therefore essential to carefully check the item of supply and apply the correct rate to avoid penalties.
