Property owners in Mallorca who want to renovate their home do not always have to pay full VAT.
If you want to refurbish or renovate your home in Mallorca, you can benefit from a reduced VAT rate. In this article, we show you how and under what circumstances this is possible. To whom can the 10 percent VAT rate be applied?
The reduced VAT can be applied to both an individual and a community of owners as long as the following conditions apply:
- The property does not serve in any way as a business premises or office.
- The use of the property is private, i.e. it is not, for example, a rented apartment.
- In the case of a community of owners, there is no reduced VAT if the invoice is addressed to the property manager or the insurance company.
Can VAT relief be applied to all types of real estate?
The VAT reduction can be applied to any dwelling, whether a first or second home, as long as the construction is completed two years before the renovation work begins. The tax reduction also applies to the renovation of garages, outbuildings (storage rooms) and communal areas. What type of renovation work can the reduction be applied to?
The reduced VAT rate of 10 percent can be applied to all renovation or repair work in residential properties, such as:
painting work / installation, renovation or replacement of the elevator / boiler room / telecommunications equipment or systems / motion detectors / electricity or plumbing work / electrical installations, water connections and air conditioning / fire protection / downpipes / renovation of buildings in general including ancillary work. What are the other requirements for tax assessment?
To be able to apply the reduced VAT to a home renovation, the cost of the materials used in the renovation must be less than 40 percent of the total cost. The materials used to determine this percentage are:
- Such that are integrated into the building (brick, plaster, cement)
- Work tops and kitchen furniture
- Visible masonry materials
- Sanitärkeramik
- Electrical installations
- Halogen spotlights
- Metal or wood
- Other materials that are necessary for carrying out the renovation .
Excluded, however:
- Gerüste
- Elements used as accessories, such as instruments or machines used on site .
- Electrical devices
For more information, please visit our office and we will be happy to advise you. Tips: Now that all doubts have been dispelled, we would like to add a few tips for the successful completion of the work:
The following VAT rates apply to renovation work on residential properties:
- For the exclusive purchase of materials: VAT of 21 percent.
- Renovation services: VAT of 10 percent.
- Services + materials (material costs are less than 40 percent of the total cost): VAT of 10 percent.
- Services + materials (material costs amount to more than 40 percent of the total renovation costs): VAT of 21 percent.
It is important that the materials are listed transparently in the invoice and, if applicable, in the cost estimate.
It must also be ensured that the invoice clearly refers to the renovation work. The same applies to all work (services) and work materials.
Also important: The property must only be intended for private use and its construction must be completed two years before the start of the renovation work.
Here is an example of the tax exemption described above :
To illustrate the requirements for a VAT deduction for home renovations in Mallorca, let's use the following example:
A property owner buys building materials for a renovation in a wholesaler (e.g. a DIY store) in the amount of 1,000 euros. The invoice amount includes 21 percent VAT, i.e. 826.44 euros + 173.55 euros VAT.
He then commissions a tradesman or contractor to carry out the renovation work. The contractor charges the property owner 1,600 euros including VAT.
So 1,322.31 euros + 277.69 euros VAT. The total cost of the renovation is therefore 2,600 euros.
However, since the materials do not exceed 40 percent of the total costs, the reduced VAT rate of 10 percent could be applied in this case. So if the property owner had not purchased the materials themselves but from the contractor, the invoice would look like this:
Labor costs 1,322.31 euros + 10 percent VAT: 1,454.54 euros.
Materials 826.44 euros + 10 percent VAT: 909.08 euros
Total costs: 2,363.58 euros.
Savings: 236.62 euros.
We are happy to share more details with you:
Omnia Consulting SLU
Law firm for legal and tax advice
Phone: 971 288 442
Address: Calle Sant Miquel 46
07002 Palma de Mallorca
