With a recent ruling the European Court of Justice has stated that goods' warehousing services can be included in those pertaining buildings when a specified portion of the of the warehouse is allocated to the exclusive use of the purchaser. The interpretation of the European judges, in line with the proposal of modification of the Rule 282/2011/EU, is clearly in contrast with the position assumed by the Italian Tax Agency so far.
2. VAT TERRITORIALITY ON SERVICES CONNECTED TO BUILDINGS
The European Directive 2008/8/EC, so called "Directive on services", has modified, with effects from January 1st 2010, the place where services become taxable for VAT. The Legislative Decree 18/2010 has enforced in the domestic law the modifications brought by the directive, redefining the territoriality's rules formerly included in the article 7 of the Republic Presidential Decree 633/1972 and in the article 40 of the Law Decree 331/1993.
VAT territorially for buildings is now ruled by article 7-bis, paragraph 1 of the RPD 633/1972. While services connected to buildings are ruled by article 7-quater, paragraph 1, letter a) of the same Decree.
Article 7-quater, paragraph 1, letter a) has not modified the criterion of connection of those services with the territory of the State, therefore starting from January 1st 2010 services on buildings are considered as performed in the State where the building is placed, in line with article 47 of the Directive 2006/112/EC that kinks the taxation of the service to the place where the building is situated.
Receiving the "Directive on services" the Italian legislator has widened the number of services connected to the place of the building, including services related to buildings, such as surveys, agency services, housing in the hospitality industry, camping or royalties on the use of buildings and preparation and coordination of works in the view of building sites.
Under the former discipline the qualification of a good as mobile or building did not assume a particular relevance for the aim of identifying the place where services were taxable or not, since criteria to identify this place was substantially the same (place of performance of the service and place of the building).
Under the new rules, instead, the distinction between movable or unmovable goods has assumed a fundamental importance, since the territoriality criterion of taxation of services is strictly connected to the nature of the considered good.
Services related to unmovable goods (buildings), rendered to VAT subjects, are considered as performed in the State of the EU or Extra-EU, where the purchaser is established, while, services connected to buildings continue to be considered as performed in the State where they are placed.
The place of performance on movable goods continues to be applied to services rendered to individual consumers.
3. FULFILMENTS FOR DOMESTIC OPERATORS
Services on movable goods exchanged between VAT subjects have to be charged with VAT by the foreign purchaser (reverse-charge).
The Italian seller is therefore obliged to issue an invoice out of the scope of VAT including:
- "reverse charge applicable", if the purchaser is a VAT subject established within the EU;
- "exchange not subject to VAT", if the purchaser is a VAT subject established outside the EU.
The purchaser of "generic services" has to pay VAT Italy with integration of the received invoice in case this is issued by an European seller or issuing a self invoice in case of Extra-European seller.
Exchanges of generic services sold or purchased have to be summarized into the INTRASTAT (EC Lists) forms for services.
Services related to unmovable goods (buildings) have to be charged with VAT by the seller in the State where they are placed independently from the place of establishment of the purchaser and from its status (VAT subject or not subject).
If services concern a building placed in another Member State, the Italia seller is obliged to issue an invoice only if the purchaser, established in the same State of the building, has to pay VAT with the reverse-charge rule.
On the contrary the Italia seller needs to apply fro a VAT registration in the country where the service is territoriality relevant, in order to issue an invoice to charge local VAT.
In case the building is placed outside the European Union, the seller has to issue an invoice independently from the place of establishment of the purchaser and from its status (VAT subject or not).
Services related to buildings have not to be included in the INTRASTAT form (EC Lists) since they are considered "specific services" and not "generic services".
4. THE DEFINITION OF UNMOVABLE GOOD
Here below we analyse the principle, domestic and of the EU, that allow to recognize unmovable goods from movable ones.
Article 12, paragraph 2 of the Directive 2006/112/CE states that a "building" is any construction incorporated to the soil.
According to the European Court of Justice, one of the fundamental characteristics of unmovable goods (buildings) is their connection to a determined portion of the earth surface. Are considered as buildings also those constructions that, although not easy movable, are not indissolubly incorporated on the soil.
Article 34 of the Ruling 282/2011/EU clarifies that work of assembling parts of a machinery, all made by the seller to the purchaser, is qualified, for territorial purposes, as a work on movable items, except when those items become part of a building.
The Italian Tax Agency has stated that unmovable goods are those ones that are permanently fixed to the soil, and movable goods that can't be separated from the property (land or building) without changing their functionality or when, to re-use the same item in another context with the same purpose, the good has to be substantially changed with anti-economic expenses.
The criterion of the "place of the building" is therefore also applicable to plants and machineries that, according to their characteristics and dimension, are permanently anchored to the soil or their removal could cause their malfunctioning or high costs or technical issues.
Regarding buildings placed in Italy, their classification is also given by the Land Property Register: this immediately imply their definition as buildings or unmovable goods.
5. THE EU RULING PROPOSAL
The proposal of EU Ruling nr. 763/2012 to modify the Ruling 282/2011/EU gives useful elements to identify the place where some services have to be charged with VAT, among which there are also those ones concerning buildings.
Under the article 13-ter of this proposal, unmovable goods are:
- a part of the soil, on earth or under the earth, on which a ownership right can be established;
- any building incorporated to the soil, over or under the sea level, that can't be easily moved;
- any item that is part of a building without which the building itself is incomplete (doors, windows, roofs, stairs, elevators);
- any items, machine or plant permanently incorporated to the building that can't be removed without destroying or altering the building itself.
The proposal of ruling specifies that services related to unmovable goods include only those services that have a sufficiently direct connection with those goods.
That is, in other terms, that the place of taxation has to be determined according to the nature of the service performed, because the taxation in the place of the building presumes the existence of a sufficient connection between the service and the good.
That direct connection with movable goods exists with no doubts for services:
- derived from a building, if the building is an essential item for the service and its performance;
- rendered or addressed to a building, having the aim of its material or juridical change.
The proposal of ruling include the list of services that can be qualified as pertaining buildings, as of those that can't.
6. GOODS' WAREHOUSING SERVICES
Among questions submitted to the Italian Tax Agency and included with replies on the Circular Message nr. 28/E/2011, there's the one pertaining the treatment to be reserved to goods' warehousing service purchased in The Netherland.
Under the Dutch domestic law, the warehousing of goods is classified among services pertaining buildings, relevant for VAT in the country where the building is placed.
While the Italian Tax Agency has stated that these services have to be considered as "generic" services under article 7-ter of the Republic Presidential Decree nr. 633/1972, since they can't be re-conduced to the category of services on building as per article 47 of the Directive 2006/112/EU.
The Agency has then invited the Italian purchaser, receiver of the invoice issued by the Dutch company that has charged domestic VAT, to apply the reverse-charge mechanism in order to avoid fines set by article 6, paragraph 9-bis of the Legislative Decree nr. 471/1997.
9. THE INTERPRETATION OF THE EUROPEAN COURT OF JUSTICE
With the Cause C-152/12 the European Court of Justice has been called to decide if a complex operation of goods' warehousing, consisting in receiving goods in the warehouse, placing them in specific stocking areas, safeguarding, packaging, delivering, downloading and uploading them and, just for some clients, re-packaging, can be considered a service related to a building or a "generic" service.
The choice for one or the other treatment is relevant for VAT application: in the first case the service is relevant in the country where the building is placed under article 47 of the Directive 2006/112/EU, that implies an invoice with VAT; in the second case the service is classified as a "generic" service under article 44 of the same Directive, relevant for VAT in the country of the purchaser (the sale's invoice does not have to charge VAT: this is paid by the purchaser with the reverse-charge mechanism).
The European Court of Justice has outlined that the warehousing of goods constitutes, in general, the main service, while receiving, placement, delivery, downloading and uploading of the goods are considered as accessory services (those services don't have an autonomous aim but allow the client to receive the main service at its best).
The potential re-packaging in single boxes of goods delivered in blocks, is an autonomous and separate service in all cases when this new packaging is not essential to guarantee a better warehousing of the goods.
With regards to the territoriality of the main service, the European Court of Justice has outlined that warehousing services can't be directly addressed to a building, since they are not expressly mentioned by article 47 of the Directive 2006/112/EU.
Nevertheless, the territorial criterion mentioned by article 47 of the Directive, in Italy article 7-quater, paragraph 1, letter a) of the Republic Presidential Decree nr. 633/1972, can be applied when the building is expressly determined and is the essential element of the service.
- the warehousing is the main service of a unique operation;
- the owner of the goods is allowed to use, all or in part, the building where goods are stored;
the warehousing service can be considered as a service related to a building.
When on the contrary the purchaser has no right to access the building or a portion of the same where goods are stored, or when the building where goods have to be stored does not constitute the essential element of the service, this is considered a "generic" service under article 44 of the European Directive and Italian article 7-ter of RPD 633/1972.
Therefore the qualification of goods' storage and warehousing services have to be evaluated with regards to the agreement signed between the seller and the purchaser.
Is therefore clear that the interpretation of the Italian Tax Agency has to be reviewed taking in account the new criteria identified by the European judgeswith the Sentence dated 27 June 2013, Cause C-155/12.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.