VAT On Immovable Property Services

2017 VAT changes on services connected with immovable property

Article 47 of Council Directive 2006/112/EC provides for a special rule 1 applicable to services connected with immovable property, based on the destination principle:

“The place of supply of services connected with immovable property including 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 or sites developed for use as camping sites, the granting of rights to use, immovable property and services for the preparation and co-ordination of construction work, such as the services of architects and of firms providing on-site supervision shall be the place where the immovable property is located.”

When compared to the Sixth VAT Directive, the Recast VAT Directive went an additional step in adding additional examples of services deemed to be connected with immovable property. However the dilemma of what constitutes a service connected with immovable property remained. Implementing Regulation 1042/2013 2 then goes the extra step in requiring a sufficiently direct connection to a specific immovable property.

First and foremost it establishes through the new Article 13b, that a specific immovable property refers to:

  • Any specific part of the earth, on or below its surface, over which title and possession can be created 3;

  • Building/construction fixed to or in the ground which cannot be easily dismantled or moved 4;

  • Installed items that make up an integral part of the building/construction without which it would be incomplete 5; and

  • Items/equipment/machinery permanently installed which cannot be moved without destroying or altering the building/construction.

Moreover Article 31A introduces a new guideline as to what qualifies as services connected with immovable property and also explicitly gives an example of what is to be considered as connected with immovable property and what does not satisfy this direct connection test:

“… Article 47… shall include only those services that have a sufficiently direct connection with that property. Services shall be regarded as having a sufficiently direct connection with immovable property in the following cases:

  1. Where the services are derived from an immovable property and that property makes up a constituent element of the service and is central to, and essential for, the services supplied; and

  2. Where the services are provided to, or directed towards, an immovable property having as their object the legal or physical alteration of that property.”

Although it is not the scope of this article to enumerate what is included and excluded from the list of services with a sufficient direct connection to property, the general methodology applied in the Implementing Directive is based on whether the services have their outcome specifically dependent from the immovable property and whether the immovable is the nexus of the service and not simply limited to changes that are significant.

In today’s hectic business lifestyles, with days becoming weeks, weeks becoming months, 2017 is closer than what one would admit and one should plan ahead so as not to be taken by surprise with the changes. After all, the new changes may require a particular taxable person to seek a VAT identification in a Member State other than of immediate establishment.


  • 1 CJEU case C166/05 Heger Rudi established that the place of supply rule applicable to services connected with immovable property is a special rule and not an exception to the general place of supply rules, meaning that a strict interpretation should not be used when establishing what falls within the parameters of the provision.
  • 2 Applicable with effect from 1 January 2017.
  • 3 Economic possession and can dispose thereof as owner.
  • 4 Without a significant effort and/or cost.
  • 5 Such as for example doors, windows, roofs, staircases and lifts.
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