Cases where the 8% rate is applied for construction services
Under the VAT Act, construction and renovation services are usually taxed at a rate of 23%. However, specific provisions allow for these services to be charged a preferential rate of 8%. This is the case with services provided on real estate included in the social housing program.
Pursuant to Art. 41 sec. 12 of the VAT Act, services the subject of which are the supply, construction, renovation, modernization, thermo-modernization or reconstruction of buildings or parts thereof included in the construction covered by the social housing program, are subject to 8% VAT tax.
Definition of construction covered by the program
The definition of housing, which is included in the social housing program, should also be cited. According to the regulations, the following have been classified to this type of facility:
residential buildings (or parts thereof) classified according to the Polish Classification of Construction Objects in section 11, excluding commercial premises and residential premises in non-residential buildings classified according to PKOB in section 12;
buildings of health care institutions providing accommodation services with medical care and a nurse, especially for elderly and disabled people.
In turn, the legislator excluded from the scope of the definition of construction covered by this special program:
single-family residential buildings with an area of more than 300 m2;
residential premises with a usable floor area of more than 150 m2.
When the area of the real estate exceeds the above limits, the reduced VAT rate applies only to the part of the tax base that corresponds to the share of the usable area qualifying for housing covered by the social housing program in the total usable area (Article 41 (12c) of the VAT Act).
Special provisions of the regulation
Pursuant to § 3 sec. 1 point 2 and 3 of the Regulation of the Minister of Finance of 23 December 2013 on goods and services for which the VAT rate is reduced, and the conditions for applying reduced rates, the preferential 8% VAT rate applies in particular to:
1. conservation works related to the construction industry covered by the social housing program,
2.maintenance works relating to:
residential buildings, referred to in article 1. 2 point 12 of the VAT Act, or parts thereof, with the exception of commercial premises,
residential premises in non-residential buildings classified in PKOB in division 12 to the extent that the above-mentioned works are not covered by the 8% rate based on the previous point.
Important contractual provisions
A taxpayer who intends to take advantage of the preferential tax rate must have evidence that will confirm the performance of the service on the buildings covered by the program in question. The problem is so significant because it is the entrepreneur who will be burdened with the burden of proof during a possible tax audit.
The legislator included an open catalog of evidence in the Tax Ordinance, allowing everything that may contribute to the clarification of the case, but is not contrary to the law (Art. 180 § 1 of the Act).
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Online advice for businessesIn practice, a concluded contract with the buyer may have a probative value as it contains detailed provisions on the performance of works, in particular with the specification of the scope, place and time of their performance.
Due to the statutory restrictions on the application of the reduced rate, it is also worth including data on the renovation, construction or modernization area of the real estate.
Handover protocol and other evidence
The taxpayer should also pay attention to the handover protocol, which is a detailed confirmation of the work performed. The value making it probable the possibility of using the preferential VAT rate may also have proofs of payment.
The aforementioned open catalog of evidence also allows for other, depending on the circumstances, measures confirming the legitimacy of the application of the preferential VAT rate in housing construction.
To summarize: when determining the VAT rate, the subject of the service provided or the supply of goods made as part of taxable activities is of paramount importance. Also, a lot depends on the status of the property, so that the entrepreneur can in good conscience apply the reduced 8% VAT rate.