Application of the reverse charge for VAT for services in the field of construction. Sami Salihu acting Director of Taxpayers Service and Education

Transcription

1 Application of the reverse charge for VAT for services in the field of construction Sami Salihu acting Director of Taxpayers Service and Education May,

2 Legal Basis Pursuant to Article 52, paragraph 1, sub-paragraphs and of the Law no. 05/L-037 on VAT, the person obliged to pay VAT, is the taxable person to whom were provided any of below supplies: provision of construction works, including repairs, cleaning, maintenance, alteration services and demolition relating to the immovable property; supply if the staff is engaged in the above-mentioned activities. 2

3 Definitions Investor is a person who funds construction works in an immovable property; The Contractor- is a person who directly concluded a contract with the investor for the construction works in an immovable property. The sub-contractor is the person who directly concluded a contract with the contractor for the construction works in an immovable property 3

4 Application of reverse charge for VAT in the field of construction Is made only for construction cases, which are in accordance with the Law on Construction in Kosovo and for projects equipped with building permits (where required) by the competent authorities. Applies only to taxable persons who are part of the transaction (the supplier and recipient of service) Applies to the provision of construction services, as well as in cases of mixed supply, when services and goods are provided in the same transaction, regardless of the ratio between them 4

5 Transaction is not subject to the application of the reverse charge Supply of goods is not accompanied by the provision of services; Lack of construction permit and the construction is not in compliance with the Law on Construction in Kosovo; One of the transaction parties (provider or recipient of the service) is not a taxable person Declarer of VAT; Contract between parties is reached before 1 September 2015; Supplies are provided to the subcontractor. 5

6 VAT reverse charge The obligation to pay VAT is transferred to the taxable person registered for VAT in Kosovo, to whom are provided supplies. Special scheme deals with construction works in constructing new buildings and renovation works, expansion and maintenance of the existing buildings. 6

7 Payment of VAT The person liable to pay VAT is the taxable person to whom the construction works were provided (the recipient of the service), including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property. 7

8 Billing Content of invoices issued by taxable person to the taxable person should be in compliance with Article 45 of the Law no.05/l-037 on VAT. The supplier, although is not obliged to pay the VAT, is obliged to issue a tax invoice. The supplier shall specify on the invoice that the recipient of the service is obliged to pay the VAT by placing reference of Article 52, paragraph 1, sub-paragraph 1.4 of the Law or any other reference indicating that the supply is subject to the reverse charge procedure. The following text will be considered as appropriate: "Reverse charge, subparagraph or of Article 52 of the Law on VAT in Kosovo" 8

9 Calculation of VAT The recipient of the supply shall calculate VAT based on the invoice received from the supplier. 9

10 Apparance of obligation to charge VAT Long-term contracts, including long term construction contracts and long term installation contract shall be considered as completed: in the month of issuance of Interim Payment Certificate, but not longer than one (1) month after the issuance of Interim Payment Certificate, in cases when the technical acceptance of works is done later, in cases when during the year there have been issued one or more Interim Payment Certificates, at the end of the year is required to be issued an Interim Payment Certificate, which will be based on real measurement of the works done; or if during the year no Interim Payment Certificate is issued, then at the end of the year appears the obligation to charge VA,T based on the real measurement of the works done. 10

11 Payments received or issuance of invoices Payments received or issuance of invoices is provided as follows: Where a payment is to be made or made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received; Where an invoice is issued before the goods or services are supplied, VAT shall become chargeable when the invoice was issued. 11

12 The right of VAT deduction The full right of VAT deduction, provided that he used or will use those goods or services for purposes of his taxable transactions Partial right, only the VAT amount attributed to taxable transaction is deducted. Part of the deducted VAT shall be determined in accordance with Article 39 of the Law no. 05/L-037 on VAT. 12

13 Declaration of VAT Recipient of the service, shall include in the form of VAT the VAT calculated on purchases of services in the field of construction, subject to the reverse charge, provided by the supplier. 13

14 Services in the field of construction Designing services and other works related to the construction; Preparatory works at the construction site, works for the demolition of the building or of its parts; Construction of buildings and its parts; Installation works; Final construction works; Maintenance, renovation and repairing of building or its parts, including, cleaning, tiling, gluing of wallpapers and parquet (floor) works; Provision of supervisory services; 14

15 Services in the field of construction Installation or placement of equipments or machinery, which upon placement/installation become immovable property; Renting of tools and equipment for construction or demolition, with their user; All other services which include supplying of movability and their inclusion in construction, so that the movability creates the quality of immovability; Engagement of staff, if the staff carries out construction services. 15

16 EXAMPLE: Company "A" (investor) a taxable person in Kosovo, on 15 September 2015, hired Company "B" (contractor) a taxable person in Kosovo to carry out the final construction works of the building funded by him, in an amount of (taxable supply = 38,000 and 18% VAT = 6.840). Contractor "B", for the completion of these works hired Company "C" (subcontractor) in an amount of 29,500 (taxable supply = 25,000 and 18% VAT = 4.500) which, for the completed works bills the Contractor "B ". After completion of works, Company "A" (the investor) sells taxable building in an amount of 50,

17 Declarations by the Company "C" (Subcontractor): Under the provisions of Article 52, sub-paragraph 1.4. of the Law no. 05/L-037 on VAT, Company "C" will not calculate the VAT in this service because the obligation for payment of VAT is transferred to the recipient of the service, namely to Company "B ". Registration in the declaration form and payment of VAT: No. Denomination Sales [10] Exempted sales with eligible to credit 25, While purchases for which is entitled to deduct VAT are recorded in the relevant section of purchases. 17

18 Declaration of Company B (contractor): Under the provisions of Article 52, sub-paragraph 1.4. Law Nr. 05/L-037 on VAT, the company "B" will not include VAT on this service because the obligation to pay VAT is transferred to the recipient of the service, so the company "A " Registrations in the declaration and payment form of VAT: No. Denomination Sales [10] Exempted sales eligible to credit 38, Calculated VAT [28] Purchases subject to reverse charge with a rate of l8 % 25, [29] 4, No. Denomination Purchases Input VAT [65] The right to VAT crediting in connection with the reverse charge at 18 % 25, [66] 4,

19 Declaration of Company A (Investor): a. If the investor provides only taxable supplies (the right to VAT deduction of 100%) Registrations in the declaration and payment form of VAT : No. Denomination Sales Calculated VAT [12] Taxable sales at the rate of 18% 50, [13] 9, [28] Purchases subject to the reverse charge with arate of 18% 38, [29] 6, No. Denomination Purchases Input VAT [65] The right to VAT crediting in connection with the reverse charge with a rate of 18% 38, [66] 6,

20 Declaration of Company A (Investor): b. If the investor supplies taxable supplies and exempt supplies (70% taxable supplies, while 30% of exempt supplies without the right to deduct VAT). Registrations in the declaration and payment form of VAT: No. Denomination Sales [9] Sales exempt without the right to crediting 15, Calculated VAT [12] Taxable sales at the rate of 18% 35, [13] 6, [28] Purchases subject to the reverse charge with a rate of 18% 38, [29] 6, No. Denomination Purchases [33] Purchases, imports of non-deductible VAT 13, Input VAT [65] The right credit VAT in connection with the reverse charge rate 18% 26, [66] 4,

21 Declaration of Company A (Investor): c. If the investor provides only exempt supplies without the right to VAT crediting Registrations in the declaration and payment form of VAT : No. Denomination Sales [9] Sales exempt without the right to crediting 50, Calculated VAT [28] Purchases subject to the reverse charge with a rate of 18% 38, [29] 6, No. Denomination Purchases [33] Purchases, imports with non-deductible VAT 44,

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