Application of VAT reverse charge in the area of construction services. Sami Salihu Acting Director of the Taxpayers Service and Education

Transcription

1 Application of VAT reverse charge in the area of construction services Sami Salihu Acting Director of the Taxpayers Service and Education January /February,

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 the VAT is the taxable person to whom were provided any of the following supplies: Supply of the construction work, including repairing, cleaning, maintenance, alteration and demolition services relating to the immovable property; Supply if the staff is engaged in the above-mentioned activities. 2

3 Persons in the special construction scheme Persons in the special construction scheme are taxable persons who provide services for other taxable persons in the area of construction. Thus, taxable person is considered a person who is registered for VAT purposes in Kosovo Declarer of VAT. 3

4 Application of VAT reverse charge in the area of construction It applies only to taxable persons who are part of the transaction (the supplier and recipient of the service) Applies for the supply of construction services, as well as in cases of mixed supply, when in the same transaction are supplied services and goods, 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 service provision; One of the parties to the transaction (provider or recipient of the service) is not a taxable person Declarer of VAT; 5

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

7 Payment of VAT The person obliged to pay VAT is the taxable person to whom are supplied construction works (the recipient of service), including repairing, cleaning, maintenance, alteration and demolition services in relation to immovable property. 7

8 Invoicing The content of the invoice issued by the taxable person to taxable person shall be in accordance with Article 45 of Law no. 05/L-037 on VAT. The supplier, although not obliged to pay VAT, he/she 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 entering a reference to Article 52, paragraph 1, sub-paragraph 1.4 of the Law, or any other reference indicating that the supply is subject to reverse charge procedure. The following text shall 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 on the basis of the invoice received from the supplier. 9

10 Chargeable event and chargeability of VAT Long term contracts including long-term construction contracts and longterm installation contracts shall be regarded as completed: In the month of issuance of Interim Payment Certificate, but no longer than one (1) month after the issuance of Interim Payment Certificate in cases when the technical receipt of works is done later, In cases where during the year have been issued one or more Interim Payment Certificates, at the end of the year is required that there should be issued an Interim Payment Certificate which will be based on real measurement of the works done, or If during the year is not issued an Interim Payment Certificate, then at the end of the year will arise the obligation to charge VAT based on the real measurement of the works done. 10

11 Payments received or issuance of invoices Payments received or issuance of invoices are regulated as follows: When payment is due or has been made on account before the goods or services are supplied, VAT shall become chargeable on receipt of payment and on the amount received; When the invoice is issued before the goods or services are supplied, VAT shall become chargeable when the invoice is issued. 11

12 The right of VAT deduction Taxable person may deduce from its VAT obligations, provided that he used or he/she will use those goods or services for purposes of his taxable transactions. The right of VAT deduction, shall be deduced only the VAT amount attributed to taxable transaction. Part of the input VAT shall be determined in accordance with Article 39 of Law no. 05/L-037 on VAT. 12

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

14 Services in the area of construction Projection services and other works related to the construction; Preparatory works in construction sites, works for the demolition of the building or its parts; Construction of buildings and its parts; Installation works; Final construction works; Maintenance, renovation and repair of building or its parts, including cleaning, putting tiles, wallpaper and parquet (floor) works; Provision of oversight works; 14

15 Services in the area of construction Installation or fitting of the equipment or machinery which after the installation or fitting become immovable property; Leasing out tools and equipment for construction or demolition, with their user; All other services that include the supply of movability and their inclusion in construction, so that the movability creates quality of immovability; Staff engagement, if the staff conducts construction services. For more about construction field services, it can be used the Code - Classification of Economic Activities (NACE Rev.2) Section F - Construction. 15

16 EXAMPLE NO. 1: Company A (Investor) a taxable person in Kosovo, on 10 December 2016, engages the company B (contractor) a taxable person in Kosovo, to carry out the final construction works in the building being financed by him, in the amount of 177,000 (taxable supply = 150,000 and 18% VAT = 27,000). Contractor B, in order to carry out these works engages the company C (subcontractor) in the amount of 118,000 (taxable supply= 100,000 and 18% VAT = 18,000) which, for the works performed issues an invoice to the contractor B. After the completion of works, the company A (the investor) sells the building at a taxable amount of 200,

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, the company C will not calculate the VAT on this service because the obligation for payment of VAT is transferred to the recipient of the service, namely to the company B. Registration in the declaration form and payment of VAT: No. Name Sales [10] Exempted sales with the right to credit 25, While purchases for which is entitled to the right to deduct VAT are recorded in the relevant section of purchase. 17

18 Declaration of the Company B (Contractor): Under the provisions of Article 52, sub-paragraph 1.4 Law no. 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, to company A. Registrations in the declaration form and payment of VAT: No. Name Sales [10] Exempted sales with the right to credit 150, Calculated VAT [28] Purchases subject to the reverse charge at rate 18% 100, [29] 18, No. Name Sales Deductible VAT [65] The right of VAT crediting in connection with the reverse charge at18% [72] VAT to be paid , [66] 18,

19 Declaration of Company A (Investor): a. If the investor provides only taxable supplies (the right to VAT deduction 100%) Registration in the form of declaration and payment of VAT: No. Name Sales Calculated VAT [12] Taxable sales at rate of 18% 200, [13] 36, [28] Purchases subject to the reverse charge at rate of 18% 150, [29] 27, No. Name Purchases Deductible VAT [65] The right to accreditation VAT in connection with the reverse load charge at rate of 18% 150, [66] 27, [72] VAT to be paid 36,

20 Declaration of Company A (Investor): b. If the investor provides taxable supplies and exempted supplies (70% taxable supplies, while 30% exempted supplies without the right to deduct VAT). Registration in the form of declaration and payment of VAT: No. Name Sales [9] Exempted sales without the right to credit 60, Calculated VAT [12] Taxable sales at the rate of 18% 140, [13] 25, [28] Purchases subject to the reverse charge rate 18% 150, [29] 27, No. Name Purchases [33] Purchases, imports of non-deductible VAT 53, Deductible VAT [65] The right to credit VAT in connection with the reverse charge rate18% [72] VAT to be paid 33, , [66] 18,

21 Declaration of Company A (Investor): c. If the investor provides only exempted supplies without the right to credit VAT Registration in the form of declaration and payment of VAT: No. Name Sales [9] Sales exempted without the right to credit 200, Calculated VAT [28] Purchases subject to the reverse charge rate 18% 150, [29] 27, No. Name Purchase [33] Purchases, imports with non-deductible VAT 177, [72] VAT to be paid 27,

22 EXAMPLE No. 2: Investor hires the contractor to construct a warehouse and has received the invoice from the supplier (contractor) in the amount of 100,000, and instead of VAT it is written: Reverse charge, under paragraph 1.4 of Article 52 of the Law on VAT in Kosovo 22

23 1. If the investor provides only taxable supplies (he/she uses the warehouse for 100% taxable supplies) No. Name Sales Calculated VAT [28 ] Purchases subject to reverse charge rate 18% 100, [29] 18, No. Name Purchases [32 ] [65 ] Purchases and non-investment imports without VAT The right to credit in connection with the reverse charge rate18% 100, Deductible VAT 100, [66] 18, [72 ] VAT to be paid

24 2. If the investor provides taxable and exempted supplies ( Mixed supplies i.e. 70% with VAT and 30% exempted from VAT). No. Name Sales Calculated VAT [28] Purchases subject to reverse charge rate 18% 100, [29] 18, No. Name Purchases [32] Purchases and investment imports without VAT 70, [34] [65] Purchases and investment imports with non-deductible VAT The right to credit in connection with the reverse charge rate18% 35, Deductible VAT 70, [66] 12, [72] VAT to be paid 5,

25 3. If the investor provides only exempted supplies without the right to deduct VAT (He/she uses the warehouse only for supplies exempted from VAT) No. Name Sales Calculated VAT [28] Purchases subject to the reverse charge rate 18% 100, [29] 18, No. Name Purchases [34] Purchases and investment imports with non-deductible VAT 118, [72] VAT to be paid 18,

26 Conclusion Application of the reverse charge of VAT, presented in this material is applied from the date of entry into force of Administrative Instruction MF-No. 06/2016 on amendment of the Administrative Instruction Nr. 03/2015 for implementing the Law no. 05/L-037 on the Value Added Tax. Udhezimi Administrativ nr on VAT.PDF VSHP NR Aplikimi i ngarkesës së kundërt në Ndertimtari.PDF 26

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