Services connected with Immovable Property by Charles Vella
In October 2015, the European Commission published a set of explanatory notes on the place of supply rules on services connected with immovable property that have entered into force on 1 January 2017.
Whilst not legally binding, the explanatory notes are intended to provide a better understanding and application of the pertinent rules and regulations governing the place of supply of services connected with immovable property.
Essentially Article 47 of the VAT Directive (Council Directive 2006/112/EC) provides that services connected with immovable property are taxable at the place where the immovable property is located. These services include the services of experts and estate agents; the provision of accommodation in the hotel sector or in sectors with a similar function, such as holiday camps and sites developed for use as camping sites; the granting of rights to use immovable property; and, services for the preparation and coordination of construction work, such as the services of architects and of firms providing on-site supervision.
With a view to ensure uniform interpretation and application of the place of supply of services rules following their introduction in 2010, an implementing regulation was published (No. 282 of 2011) which was further amended by another implementing regulation (No. 1042 of 2013) that contained, among other, clear definitions of the concept of immovable property and related services as well as the elements required for a service to have a connection with an immovable property.
Of particular value is the analysis of each service included in Article 31(a) of the Implementing Regulation as amended, outlining the reasoning behind which the particular service is classified either as being or not being connected with immovable property, some of which are being reproduced hereunder:
- The drawing up of plans for a building or parts of a building regardless of whether the building is ultimately erected or not is considered to be a service connected to immovable property only insofar as the plans are designated for a particular plot of land. On the other hand, if the drawing up of plans are not designated for a particular plot of land, such as for example plans by a design studio for the purposes of an exhibition, then they are not considered to be services connected with an immovable property.
- A service consisting in the storage of goods in an immovable property is considered to be connected with immovable property only if a specific part of that immovable property has been assigned for the exclusive use of the customer. It follows that where no specific part of the immovable property in which the goods are stored has not been assigned for the exclusive use of the customer then the service is not considered to be connected with immovable property.
- Work on land, including agricultural services such as tillage, sowing, watering and fertilisations are classified as connected with immovable property.
- Surveying and assessment of the risk and integrity of immovable property are services connected to immovable property.
- 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 a dispute is classified as connected with immovable property.
- The assignment of rights including licensing, other than the leasing/letting or provision of accommodation, to use whole or part of an immovable property such as granting of fishing and hunting rights or access to lounges in airports or the use of an infrastructure for which tolls are charged, such as a bridge or a tunnel, is considered as connected to immovable property.
- Property management services is classified as connected with immovable property whereas portfolio management of investments in real estate is considered as not connected with immovable property.
- The right to stay in a specific place resulting from the conversion of timeshare usage rights and the like is deemed to be connected with immovable property.
- The provision of advertising, even if it involves the use of immovable property is not a service connected with immovable property.
- Services consisting in the installation or assembly, including maintenance and repair thereof, of machines or equipment which, upon assembly qualify as immovable property such as lifts and escalators are classified as connected with immovable property.
- The installation of security systems is considered as connected with immovable property to the extent that the security system that has been installed forms an integral part of a building or construction without which the building or construction is incomplete, such as in a correctional facility or in banking premises or where the security system is permanently installed in a building or construction and cannot be removed without destroying or altering the building such as for example in the case of a block of apartments or offices.
- Provision of legal services is deemed as connected with immovable property insofar as it relates to the transfer of a title to immovable property including the transfer of certain interests in immovable property or rights in rem over immovable property such as notary work, or to the drawing up of a contract to sell or acquire immovable property, even if the underlying transaction resulting in the legal alteration of the property is not carried through. On the other hand, legal services are treated as not connected with immovable property where they relate to contracts, including advice given in terms of a contract to transfer immovable property, or to enforce such a contract, or to prove the existence of such a contract, where such services are not specific to a transfer of a title on an immovable property.
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