VAT on Property - An Update

Jimmy Sheehan - Monday, September 03, 2012

Over the summer there were a number of updates from Revenue, one of which was in relation to the VAT treatment of Immovable Property.

The initial new VAT rules took effect on 01 January 2010 but there have been subtle changes  and will continue to be until the full effect of all changes takes place which is proposed to happen by 2015.

Below summarises a couple of points in relation to the VAT treatment not just on the sale or letting of property but also in relation to other services pertaining to that property.

General Rule

The General Rule is VAT must be added to invoices based on where the supplier is based. If however the customer is based registered for VAT in another tax jurisdiction then no VAT will be charged.

Example1:

An Irish based company carries out a service for another Irish based company/individual. VAT will be charged on the invoice value.

Example2:

An Irish based company carries out a service in Ireland for a UK based company that is registered for VAT in the UK. No VAT is charged, but the VAT number of the client must be shown on the invoice.

Example3:

An Irish based company carries out a service in Ireland for a UK based company/individual that is NOT registered for VAT in the UK. VAT is charged on the invoice value.

However, in relation to property it does not matter where the client is located. VAT is chargeable if the property is located in Ireland.
However for this to apply the service supplied must be directly related to a specific property. It does not apply if the service involved has only an indirect connection with land or if the land related service is only an incidental component of a more comprehensive supply of services.

For example, the following are some examples of services directly linked to a property;

  • The drawing up of plans for a building or parts of a building designated for a particular plot of land regardless of whether the building is erected;
  • The valuation of immovable property, including where such service is needed for insurance purposes, to determine the value of a property as collateral for a loan, or to assess risk and damages in disputes;
  • Intermediation in the sale or letting of immovable property;
  • The assessment of the risk and integrity of immovable property;
  • Property management, other than management of a portfolio of investments in real estate, consisting in the operation of commercial industrial or residential property by or on behalf of the owner of the property;

On the other hand the following are NOT deemed to be directly linked to the property and as such the general VAT rules apply (as set out in Examples 1 - 3 above);

  • The letting of property or part of a property for the purposes of advertising;
  • Advice and information relating to land prices or property markets which do not relate to specific properties;
  • Feasibility studies of the commercial potential of development etc. in a geographical area;
  • Legal or estate agents fees for services that do not relate to specific properties;
  • The drawing up of plans for a building or parts of a building if not designated for a particular plot of land;

There are too many variables from our experience with clients to try and put a comprehensive list of real life examples together. Hopefully this article has given you enough clarification to allow you to determine if VAT is chargeable on the services you, as a property agent, are offering to clients residing outside the Republic of Ireland.

If you require any assistance in clarifying your VAT obligations call us on 601 0005.
We'll visit you and determine your standing to ensure you are tax compliant.