VAT Treatment of Construction Services

The New Manual also includes a clarification, in paragraph 7.1.  The paragraph confirms that where a connected person of the owner of land carries out construction work for the landowner, the connected person is regarded as providing a construction service to the landowner and the reverse charge applies to the payment.

Taxation of Construction Services

The reduced rate of VAT at 13.5% generally applies to construction services.

VAT on construction services that are not subject to RCT are taxed under normal VAT rules.

Supplies of construction services, by a sub-contractor to a principal contractor, where the operation of RCT is required are dealt with on a reverse charge basis.  The reverse charge also applies where there is a supply of construction services in the State between two connected persons.

Construction service providers may be involved in different types of contracts therefore it is important to be aware of the different VAT treatment for each contract.

Vat Registration

Taxable persons engaged in construction services are obliged to register for VAT if their annual turnover from the supply of such services exceeds, or is likely to exceed, the services threshold of €40,000.

Reverse Charge

Under normal rules VAT is charged and accounted for by the supplier of the goods or services. However, where the reverse charge applies to the supply of goods or services, the recipient rather than the supplier, is obliged to account for the VAT due.

When the reverse charge applies

The reverse charge applies where there is a supply of construction services:

• By a sub-contractor to a principal contractor (which includes public bodies) where the operation of RCT is required.

• Between two connected persons.

Further detail as to how the reverse charge operates is available in the New Manual.

The VAT Manual Reverse Charge Construction is no longer relevant, as the information from this VAT Manual is now included in the New Manual.  The New Manual is available here.