The VAT rate for new residential property dropped to 5% again (as between 2016 and 2019) from 1 January 2021. The support available has now been expanded once again: when buying new residential property, tax refund support can be claimed up to the amount of the 5% VAT (up to a cap of EUR 14,000, the tax refund is available for invoices issued with 27% VAT in certain cases).
The preferential VAT rate of 5% for residential property is applicable if the total usable floor space does not exceed 150 square metres for a multi-occupational residential property, or 300 square metres for detached family homes.
It is worth knowing that when buying a new property there is no guarantee that all parts of the property will be eligible for the lower tax rate: you can receive invoices with VAT of 5%, and invoices with VAT of 27%. Areas not required for the intended use as a dwelling shall not be construed as residential property, even if built adjacent to the residential building, such as: garage, workshop, shop, farm building. This is why the price of areas not used as a dwelling must be determined separately when concluding the contract, since the preferential VAT rate is not applicable in this case and the general rate of 27% applies.
According to the rule currently in force, the preferential 5% rate is applicable if the property sale (or payment in advance) falls between 1 January 2021 and 31 December 2022. Under a transitional rule, which will take effect as of 1 January 2023, the preferential VAT rate will remain applicable if the sale falls between 1 January 2023 and 31 December 2026 – provided that, in the case of construction work subject to a building permit, the building permit for the residential property becomes final by 31 December 2022.
The Global VAT Newsletter focuses on changes in compliance duties in various EU and non-EU countries.
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