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%. However, this rate could be reduced to 4% or 10% only if the supply takes place through a procurement contract that provides for the construction and delivery of the house “turnkey”.
This clarification was provided by the Revenue Agency in answer no. 246/2024.
But when is it possible to benefit from VAT benefits? And what are the consequences of incorrect application of rates?
Continue reading to learn more about this topic.
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The distinction between the supply of components and a procurement contract
According to the Revenue Agency, the VAT regime depends on the nature of the contract. When a company undertakes to deliver a complete house, it is configured as one home salewhich, in the presence of specific requirements, can access reduced VAT rates (4% or 10%).
On the contrary, if the purchase only concerns prefabricated pieces to be assembled, without a global construction contract, the ordinary rate of 22% applies.
In the specific case of answer no. 246/2024, the customer has purchased prefabricated walls that will be assembled, but the operation does not fall within the definition of real estate sale. Therefore, the preferential rate is not applicable.
For cross-border transactions, the Agency calls for the use of the regime One Stop Shop (OSS). This system simplifies the payment of VAT for goods and services supplied in different member states of the European Union, allowing payment in a single state.
However, this simplification does not affect the determination of the applicable rate: it is necessary to evaluate the nature of the operation, as in the case of prefabricated houses.
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Reduced VAT rates: when do they apply?
The reduced VAT rates (4% or 10%) represent a significant opportunity for tax savings, but their application is strictly linked to certain conditions established by law. Let’s analyze the two main cases in which these benefits can be applied:
VAT rate of 4%: first home and specific categories
The lower rate of 4% is reserved for special cases, such as the purchase or construction of first house of residence, provided that the following requirements are met:
- The home must not be considered “luxury”, according to the criteria indicated by the Ministerial Decree of 2 August 1969.
- The buyer must not own other suitable homes in the same municipality and must not have benefited from first home incentives in the past.
- The property must be intended for residential use and not for commercial or productive use.
In the context of prefabricated houses, the 4% rate applies only if the company supplies and builds the entire home, delivering it turnkey, and if the procurement contract falls within the parameters of the relief for the first home.
VAT rate of 10%: subsidized housing and non-luxury homes
The reduced rate of 10% is wider and can be applied in the following cases:
- Affiliated construction: concerns interventions carried out on properties intended for public or subsidized residential construction.
- Extraordinary renovations and maintenance: the rate applies to the carrying out of major works, provided they are intended for private homes.
- Purchase of new properties or properties under construction: if the company takes care of the entire construction cycle and the sale takes place as a complete property (even in the case of turnkey prefabricated houses).
In the case of prefabricated houses, the 10% rate can be applied if the manufacturing company undertakes to deliver the finished property, and if the use of the house is clearly intended for private purposes and not for productive use.
Application of the ordinary rate of 22%
According to Resolution 503351/1974, the ordinary VAT rate of 22% applies when:
- The customer buys the singles prefabricated components (e.g. panels, walls, modules) of a house.
- The assembly or assembly is carried out by the manufacturing company itself or by third parties, but does not constitute a contract for the delivery of a complete home.
The Resolution underlines that, in these cases, the operation qualifies as one sale of movable goods and not as a real estate sale. This is because the components supplied constitute the object of the company’s ordinary activity, i.e. the production of prefabricated materials. Therefore, the VAT rate to be applied is the ordinary one.
A practical example is the case of a customer who purchases prefabricated panels for a house and commissions their assembly to the same selling company: since it is not the sale of a property, but of individual materials, VAT at 22% is applied.
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Fundamental differences between preferential rates and ordinary rates
The key to distinguishing between the reduced rate and the ordinary rate lies in the type of contract stipulated:
- If the contract provides only the supply of prefabricated materials (for example, panels, wooden structures, etc.), even with assembly included, the ordinary rate of 22% applies.
- However, if the contract can be classified as construction contractwith the company’s commitment to deliver a complete home compliant with housing standards, the reduced rates apply.
Practical application examples
- Rate at 4%: A family purchases a prefabricated house from a company that undertakes to build it and deliver it ready for use. The house meets the requirements of a first home and is sold with a turnkey contract.
- Rate at 10%: A company builds a prefabricated house for an affiliated housing cooperative. The property is not luxury and the contract is a tender one.
- Rate at 22%: A private individual purchases the prefabricated modules of a house, which will be assembled by the selling company itself, without a complete construction contract.
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Documentation necessary to access the benefits
To benefit from the reduced rates, it is essential that the transaction is correctly documented. The main documents required include:
- Declarations from the client certifying use as a first home or for subsidized construction.
- Procurement contracts or documents confirming the nature of the operation as construction and turnkey delivery.
- Invoices with clear indication of the rate applied and a detailed description of the operations carried out.
