The new VAT rules on the sale of property have been in
force for over a year. However, these have yet to gain wide
acknowledgement and mistakes are often made when applying the
rules. The obligation to pay VAT should not be overlooked when
buying or selling real estate. Moreover, all notifications should
be timely submitted: mistakes may be costly. For these reasons we
will point to some of the main aspects of the new
In April 2012 amendments to the Value Added Tax Act came into
force establishing a reverse charge mechanism on taxation of real
estate for which inclusion of VAT is voluntary. VAT inclusion is
voluntary when an immovable corresponds to the following three
it does not constitute a dwelling,
it does not constitute an empty plot in sense of the
Planning Act and
it is being sold after first occupation or re-occupation.
Generally, it is an immovable occupied by a commercial building
or a production building.
When including voluntary VAT a reverse charge mechanism is
the seller does not include VAT transferrable to the state in
the purchase price but
VAT is declared and immediately deducted as input VAT by the
VAT inclusion is necessary and reasonable in situations where
costs have been incurred or investments have been made by the
seller over the past decade as regards the immovable in respect of
which the seller applies for a refund of VAT from the state. If VAT
is not included in the purchase price on sale of an immovable, the
seller will have to adjust the input VAT deducted during this
period. Previously deducted input VAT which may not be deducted as
a result of the adjustment will have to be refunded to the
When implementing the new rules, note that voluntary VAT
inclusion requires prior written notification to the Tax Authority.
The Tax Authority has not specified a separate format or set
procedures for submitting notifications. Notification in a
freely chosen format has to be sent to the Tax Authority by mail.
In practice, the Tax Authority has accepted digitally signed and
Often the seller is not aware of the obligation to notify and
the issue only arises upon preparation of a VAT declaration.
Typically real estate transactions are preceded by intense rounds
of negotiations in the midst of which notifications may simply be
overlooked. Therefore, it is not uncommon that notifications are
The law does not indicate consequences for delays. In the worst
case scenario the Tax Authority may assume that the prescribed
conditions for VAT inclusion were not fulfilled and require
adjustment of input VAT.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As Karen Gidwani explains fitness for purpose is a phrase often used in everyday language in relation to a service or a product that is not working as expected or desired. In construction contracts, however, the concept of fitness for purpose has its own body of case law and analysis, and the effect of including a fitness for purpose clause in a construction contract can be draconian.
When the amendments to the Housing Grants (Construction and Regeneration) Act 1996 ("the Construction Act") were introduced by Part 8 of the Local Democracy, Economic Development and Construction Act 2009 ("the New Act") it was not entirely clear how the changes in the payment provisions section would impact on the behaviour of parties to construction contracts.
In August 2015 EDF Energy announced its preferred bidders for Hinkley Point C and the press were reporting that ministers are set to give the go ahead to the project once parliament returns in the Autumn. Since then the Government has announced a £2 billion guarantee to try and ensure the project goes ahead.
There are a range of remedies available to landlords of commercial properties where the tenant has stopped paying rent.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”