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VAT on building works and repairs. When are they taxed at 10% or 21%?

09/10/2022

Within the construction sector, one of the aspects that generates the most doubts is the tax rate of the VAT that must be applied to the renovation works of flats depending on the type of work carried out and the characteristics of the housing, which is why I am sending you this clarification prepared by the College's tax advisor.

The VAT rate applicable to each transaction is detailed below.

The following operations are taxed at the reduced rate (10%):

Construction or renovation of homes:
Execution of construction work or rehabilitation of buildings intended mainly for housing, including premises, garages and annexes, as a result of contracts directly formalized between the developer and the contractor. (The reduced rate does not apply to subcontracts). Buildings in which at least 50% of the built surface is intended for this use are considered primarily intended for housing.

Extension of housing:
It is considered construction, and 10% is applied, to the extension of a home whenever the living area increases. Interior renovation works of a home are not considered construction.

Sale with installation of wardrobes for homes:
Sales with installation of kitchen and bathroom cabinets and wall cabinets for homes, as a result of contracts directly formalized between the developer of the construction or renovation and the contractor.

Construction of community garages:
Work executions directly formalized with communities of owners for the construction of garages in buildings intended primarily for housing, provided that they are carried out on common land and the number of spaces to be awarded to each owner does not exceed two.

Repair or renovation works when the recipient is a natural person and uses the home for private use. Requirements:

• That the construction or rehabilitation has ended at least two years before the beginning of the renovation or repair works;
• That the person carrying out the works does not provide materials for their execution or, in the event that they provide them, their cost does not exceed 40 percent of the taxable base of the operation.

Rehabilitation, similar and related works that are also taxed at 10%:

What is considered rehabilitation work?

• That more than 50% of the total cost of the rehabilitation project corresponds to consolidation works or treatment of structural elements, facades or roofs or to works similar or related to those of rehabilitation.
• That the total amount of the total works exceeds 25% of the purchase price of the building (if it was carried out in the two years prior to the start of the rehabilitation works), or of the market value of the building before its rehabilitation, discounting in both cases the value of the land.

What are the works analogous to those of rehabilitation?

• Those of structural adequacy that provide the building with constructive safety conditions, so that its stability and mechanical resistance are guaranteed.
• Those of reinforcement or adaptation of the foundation, as well as those that affect or consist of the treatment of pillars or slabs.
• The expansion of the built surface, above and below grade.
• The reconstruction of facades and interior courtyards.
• The installation of lifting elements, including those intended to save architectural barriers for use by the disabled.

What are the related works to those of rehabilitation?

Works related to rehabilitation will be considered those mentioned below when their total cost is lower than that derived from consolidation works or treatment of structural elements, facades or roofs and, if applicable, from works similar to these, as long as they are inextricably linked and do not consist of the mere finish or decoration of the building or the simple maintenance or painting of the facade:

• Masonry, plumbing and carpentry works.
• Those intended for the improvement and adaptation of enclosures, electrical installations, water and air conditioning and fire protection.
• Energy rehabilitation works.

Energy rehabilitation works will be considered those aimed at improving the energy performance of buildings by reducing their energy demand, increasing the performance of thermal systems and installations or incorporating equipment that uses renewable energy sources.

The following operations are taxed at the ordinary rate of 21%:

Repair or renovation works:
In general, they are taxed at 21%, but with the exceptions we have seen previously regarding certain repairs or renovations in homes.

Cupboards, doors and windows:
The delivery without installation of doors, windows, cupboards, kitchen furniture, etc., for carrying out works in buildings.