VQOTW: EU Land Related Services

My client has won a contract to decommission a power plant in Germany and will be invoicing a German company for the work. As this is a supply to a VAT- registered EU customer surely they can zero-rate?

A. The general rule for the business to business (B2B) place of supply of services is that the supply is deemed to be received where the recipient belongs and if the recipient belongs in another Member State the supply would be outside the scope of UK VAT rather than zero-rated (pedantic VAT point!)

However, there are still exceptions to this rule, such as services relating to land. VAT Notice 741A defines land-related services to include “those services… intended to legally or physically alter a property” and offers as an example “construction or demolition of a building or permanent structure”.

If your client is contracted to demolish what constitutes immoveable property located in Germany, the place of supply will be Germany. As such they will be required to take local advice to see whether they will be liable to VAT register in Germany. Some Member States (the UK among them) have extended the reverse charge rule to include land related services when supplied to VAT registered customers. Indeed this is mandatory in the UK and if the roles were reversed a German contractor would not be eligible, let alone liable to register in the UK and the VAT registered recipient would bring the VAT to account under the reverse charge procedure. If Germany have applied this measure, your client’s customer will be able to account for the VAT as a reverse charge, thus avoiding the need for your client to register in Germany.

If the client is using the services of a German sub-contractor they will incur German VAT and should check with the German authorities whether this is recoverable under the EU Refund/8th Directive claim scheme. The receipt of general rule services such as the hire of goods without an operator should not incur any German VAT as your client has no actual German establishment and will account for the reverse charge.

For completeness the rules pertaining to the UK extension to the reverse charge and its effect on the VAT registration eligibility for overseas suppliers can be found at https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/vatposs14700

If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.

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VAT Advice Consultant
0844 892 2470

Sally is the Team Leader of the VAT Advice and Consultancy team at Croner Taxwise. She has worked in VAT since 1990, including eight years spent with HMRC, both as an Assurance and Enquiries Officer involved in presenting seminars and business education. Since joining private practice in 1999, Sally has specialised in providing VAT technical advice to a variety of clients, ranging from small one-man bands to large multi-national corporations, on the full range of VAT technical matters.

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