VAT rate for built-in furniture - how to tax?

Services related to residential premises are subject to a reduced VAT rate of 8%. Therefore, many questions arise regarding the delivery and assembly of individual elements of residential premises. In this article, we will analyze whether the aforementioned reduced VAT rate for built-in furniture may apply to their delivery and assembly.

Reduced VAT rate for built-in furniture

In the light of Art. 41 sec. 12 of the VAT Act, the rate of 8% of the tax referred to in sec. 2, applies to:

1. deliveries, construction, renovation, modernization, thermo-modernization, reconstruction or maintenance works related to buildings or parts thereof included in the construction industry covered by the social housing program;

2. maintenance works related to:

1. residential buildings or their parts, with the exception of commercial premises,

2. residential premises in non-residential buildings classified in the Polish Classification of Construction Objects in section 12 - to the extent that the listed works are not covered by this rate on the basis of point 1.

Construction covered by the social housing program does not include single-family residential buildings with a usable floor area of ​​more than 300 m2 and residential premises with a usable floor area of ​​more than 150 m2.

If the sale and assembly of built-in furniture is classified as related to a construction object and the area of ​​the apartment does not exceed 150 m2, the 8% VAT rate will apply.

The position of administrative courts and the VAT rate for built-in furniture

The content of the cited provision does not clearly indicate whether the 8% VAT rate can be applied to the delivery and assembly of built-in furniture.

As always in such situations, it is worth referring to the available jurisprudence, which in most cases (and for a long time) presents a position favorable to taxpayers in this matter.

This is also the result of the ruling of the Supreme Administrative Court: I FSK 1362/17 of December 18, 2019, I FSK 792/19 of July 3, 2019. From the justifications to these judgments, it can be concluded that in order to recognize the activity of permanent furniture construction as a service of modernization of a building object, it is necessary to present jointly specific premises:

• made to measure for a specific construction object or part of it (premises) and permanently connected with its structural elements, furniture components do not function in the market, as is the case with "free-standing" furniture, therefore they cannot be equated with the delivery of goods in the form of ready-made furniture that has no permanent connection with the building object or its part;

• furniture to a large extent uses the structural elements of the building object (walls, floor or ceiling). These elements determine the design range of the furniture (structural elements of a building object or its part (premises) play the role of furniture elements);

• The utility values ​​of the furniture development are determined by the permanent connection of the custom-made parts of the development with the structural elements of the building object or its part (walls, floor, ceiling) in a way that prevents it from being moved to another place (permanent buildings fulfilling a specific utility function as a whole), and the same parts, without their permanent attachment to the structural elements of the building (walls, floor, ceiling), do not meet the functional attribute of a piece of furniture.

With the above Conditions show that when analyzing whether a VAT rate of 8% may apply, it is first of all necessary to examine the degree of structural connection of furniture components and structural elements of the dwelling. Simply put, there must be a durable and functional connection between the piece of furniture and the walls, ceiling and floor of the specific premises. Such buildings cannot be easily detached from the premises without interfering with the construction of the dwelling.

Activities consisting in designing, adjusting and permanent assembly of furniture for development fall within the concept of modernization of buildings, if it is done with the use of elements of the premises (walls, floors, ceilings) in a significant way. The structural combination of these components and elements of the premises creates a permanent development that fulfills a specific utility function as a whole.

VAT rate for built-in furniture - tax office

The positive news for taxpayers is that the tax authorities, under the influence of extensive judicial decisions, began to adopt a favorable position.

In the letter of the Ministry of Finance of May 27, 2020 (No. after dismantling, the building is unusable, due to the fact that its elements themselves do not fulfill the functional function of a piece of furniture, we are dealing with the modernization of a building, so a rate of 8% may be applied.

Also in this case, the tax office emphasized the existence of close links between built-in furniture and structural elements of the premises. To understand the situation better, let's provide some examples.

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Example 1.

The entrepreneur has designed, manufactured and installed a built-in wardrobe according to the customer's order. A wardrobe made of furniture boards cut to a specific size was installed in a recess in the hall. The assembly was made with plugs and screws, using the back and side walls of the recess. After disassembly, the wardrobe is unusable and does not function as a piece of furniture. In this case, it is possible to apply the 8% VAT rate to the modernization of the facility included in the social housing program.

Example 2.

A natural person ordered a wardrobe with specific dimensions for his apartment. It fits perfectly in a recess in the bedroom. However, it is not permanently fixed to the walls of the premises and can be reassembled in any other place. Consequently, there is no premise of a significant connection with the structural elements of the building object, which means that the reduced rate is not applicable. The delivery and assembly of this type of furniture will be taxed at a rate of 23%.

Example 3.

The entrepreneur made custom-made built-in furniture for the client. Importantly, however, they were not attached to the walls of the building with fixing hooks. These are stand-alone pieces of furniture that can still be used as a piece of furniture without any structural elements of the building. In this case, we cannot speak of a modernization service for a construction object covered by a social housing program. Also in these circumstances, we do not apply the 8% rate, but the 23% rate.

Only the delivery and assembly of durable furniture, which is made to order for a specific size, permanently attached to the structure of the premises and, after disassembly, cannot function as a piece of furniture in another property, may benefit from the 8% VAT rate.

Moving on to the summary, we can indicate that there may be many situations in economic transactions relating to the services of assembling furniture for built-in residential premises. It should be remembered that a reduced VAT rate for built-in furniture is not always possible. A given case should be analyzed individually through the prism of functionality and permanent connection of the furniture with the premises.