Service-Tax

VAT rate for maintenance services in residential buildings - rules

The maintenance and modernization of buildings, housing premises consists of a number of different activities that operate coherently or separately in relation to the main service. Taxation of the provided maintenance services, modernization of buildings and housing premises may apply to construction covered by the social housing program. The question here arises whether the entity providing this type of service will always be able to apply the reduced rate of 8% VAT? What should the VAT rate be applied to residential maintenance services? The analysis of these and other problems in the aspect of the 8% VAT rate is presented in this publication.

8% VAT rate only for certain goods and services

Pursuant to Art. 41 sec. 2 of the Act on tax on goods and services, hereinafter referred to as the VAT Act, to goods and services listed in Annex 3 to the Act, other than classified according to the Polish Classification of Products and Services in the grouping of services related to catering (PKWiU 56), the tax rate is 8%.

In Annex 3 to the VAT Act, the taxpayer can find, among others:

food goods,
goods normally used in agriculture,
goods related to health protection,
other goods
and some services.

For the identification of services taxed with the reduced rate of 8%, the taxpayer should use the PKWiU 2015 classification. Annex 3, however, does not cover all cases related to the possibility of using the reduced VAT rate - 8%.

The reduced 8% VAT rate may be applied by the taxpayer to the following activities:

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

In addition, the taxpayer will apply the 8% VAT rate to the sale of maintenance services related to:

residential buildings or their parts, excluding commercial premises;
residential premises in non-residential buildings classified in the Polish Classification of Construction Objects in section 12.

VAT rate for maintenance services in residential buildings - reduction of the standard VAT rate to 8%

At this point, it is necessary to cite § 3 sec. 1 point 2 of the Regulation of the Minister of Finance of 23 December 2013 on goods and services for which the VAT rate is reduced and the conditions for applying reduced rates, hereinafter referred to as the regulation, the 23% VAT rate is reduced to 8% for maintenance works related to construction covered by the social housing program.

In turn, maintenance works in the light of the VAT Act are works aimed at maintaining the technical efficiency of building elements or parts thereof, other than renovation.

Thus, the reduction of the VAT rate to the amount of 8% for maintenance works applies to:

residential buildings, referred to in article 1. 2 point 12 of the Act, or parts thereof, with the exception of commercial premises;
residential premises in non-residential buildings classified in PKOB in section 12 - to the extent that the above-mentioned works are not covered by this rate pursuant to point 2.

The reduction of the VAT rate from 23% to 8% will not apply if the value of goods excluding VAT included in the tax base for the provision of maintenance works exceeds 50% of this base.

Therefore, taking into account the above, it should be emphasized that the reduced VAT rate of 8% cannot be applied arbitrarily to all deliveries of buildings covered by the social housing program or to renovation, modernization, maintenance of these buildings, housing premises, etc. residential buildings are used in the act.

Objects of housing construction

By the term "housing covered by the social housing program", the legislator understands housing structures or parts thereof (excluding commercial premises):

residential buildings for permanent residence located in PKOB in section 11;
residential premises in non-residential buildings classified in the Polish Classification of Construction Objects in section 12 (PKOB);
facilities classified in PKOB class ex 1264 - only buildings of health care institutions providing accommodation services with medical and nursing care, especially for elderly and disabled people, as well as micro-installations.

It is worth noting that the scope of construction covered by the social housing program should not include:

single-family residential buildings with a usable floor area of more than 300 m2;
residential premises with a usable area of more than 150 m2.

Residential buildings

The reduced VAT rate of 8% may be applied by the taxpayer to deliveries of buildings and certain construction works in buildings which are residential buildings for permanent residence located in PKOB in section 11. They are presented in the table below.

Department 11 of PKOB RESIDENTIAL BUILDINGS
PKOB symbol	Description of the department / subdivision	Description of the buildings included in the sections and sub-divisions of Division 11 classification
111	Single-family residential buildings
1110	Single-family residential buildings	Independent buildings such as: pavilions, villas, holiday homes, forester's lodges, farmhouses, country residences, summer houses, etc. Semi-detached or terraced houses, where each apartment has its own entrance from the ground level. This class does not include: Farm buildings, Buildings with two apartments, Buildings with three or more apartments.
112	Two-apartment and multi-apartment buildings
1121	Two-apartment buildings	Independent buildings, semi-detached or terraced houses with two apartments.
1122	Buildings by three and more apartments	Other residential buildings, such as: residential buildings with three or more apartments. This class does not include: Collective residence buildings, Hotels, Youth hostels, mobile homes, holiday homes.
113	Collective residence buildings
1130	Collective residence buildings	Collective residence buildings, including residential houses for elderly people, students, children and other social groups, e.g.nursing homes, workers' hotels, boarding houses and school dormitories, student houses, orphanages, homes for the homeless, etc. Residential buildings in barracks, prisons and correctional facilities, and remand centers. Buildings of presidential and episcopal residences. This class does not include: Hospitals, clinics and buildings of institutions with medical care (medical or nursing), Barracks buildings.

Residential facility exceeding the limit size

It should be emphasized that in the light of Art. 12c of the VAT Act, if the maintenance or modernization services concern buildings, residential premises with an area exceeding the above-mentioned limits, the reduced rate of 8% VAT will apply only to the part of the tax base corresponding to the share of the usable area qualifying for construction covered by the social housing program in the total area usable.

Therefore, after exceeding the above-mentioned of the limits, the VAT rate for the services in question will be in proportion above the established value of 23% of VAT.

The first part of the publication presents a number of the most important conditions allowing the application of the reduced VAT rate of 8% VAT to the taxpayer in the construction, delivery and provision of certain construction services in residential buildings. The second part presents many positions of tax authorities in various circumstances regarding the possibility of using the reduced VAT rate of 8%.

Taxation of maintenance services, modernization of installation elements in residential buildings covered by the social housing program and in residential premises in non-residential buildings gives taxpayers providing these services many doubts as to the application of the correct VAT rate.

Some doubts regarding the basic or reduced VAT rate will be dispelled in this publication.

VAT rate for maintenance services in residential buildings - maintenance and repair of building fencing, benches, playground included in the social housing program

The civil law partnership provides maintenance and repair services in buildings located in section 11, covered by the social housing program, and in section 12, i.e. residential premises in non-residential buildings.

This time, the company accepted an order for bricklaying and painting services related to the maintenance of fencing elements, benches, and playground equipment surrounding construction facilities covered by the social housing program. In such a case, can the taxpayer apply a reduced tax rate of 8% for the services provided?

Unfortunately not. Although the result of the services provided has the basis for the conservation of fencing elements surrounding construction facilities covered by the social housing program, the Director of the Tax Chamber in Bydgoszcz in an individual interpretation of November 15, 2012, ref. No. ITPP1 / 443-858 / 10 / TS, as well as the Director of the Tax Chamber in Warsaw in the individual interpretation of December 1, 2011, ref. No. IPPP3 / 443-1172 / 11-4 / k.c. stated that the appropriate rate of VAT for this type of services will be 23%. The basis for the application of the reduced 8% VAT rate are not works related to infrastructure accompanying residential construction, e.g. the installation of fences.

VAT rate for maintenance services in residential buildings - repair and maintenance of plumbing equipment in buildings included in the social housing program

A natural person running a business provides both the installation of water supply connections and the maintenance of water and sewage systems. The taxpayer is currently commissioning the repair and maintenance of water and sewage infrastructure devices at buildings covered by the social housing program. These services include the repair of rainwater drainage systems or the maintenance of devices in a separate building, in which there are filtering devices and water supply to residential buildings.

The taxpayer doubted whether such services would constitute maintenance services for buildings and dwellings covered by the social housing program, for which he would be able to apply a reduced tax rate of 8% VAT.

As indicated by the Director of the Tax Chamber in Łódź in the individual interpretation of February 29, 2012, ref. No. IPTPP1 / 443-1017 / 11-4 / AK, due to the nature of the works that do not qualify as maintenance services (under the VAT Act) and the provision of these works outside the body of the building, will result in the VAT rate appropriate for the application in this situation to this type of service will be 23%.

VAT rate for maintenance services in residential buildings - repair and maintenance of gas and central heating systems in buildings included in the social housing program

A natural person running a business has accepted an order to perform current and periodic inspections of the technical condition of residential buildings (covered by the social housing program) (residential premises) and the central heating and gas installations located in them. The taxpayer classified these services under the number PKWiU 71.12.11.0. By issuing an invoice for the above-mentioned services, would like to apply a reduced tax rate of 8% VAT. Will he be able to do this?

In this matter, the Director of the Tax Chamber in Katowice and Bydgoszcz spoke in an individual interpretation of May 12, 2011, ref. No. IBPP2 / 443-146 / 11 / ICz and from November 18, 2011 with reference number ITPP2 / 443-1191 / 11 / AK.

Both decided that the services provided (in buildings covered by the social housing program), consisting in the inspection of gas and central heating installations, when they do not involve any physical interference with the building material, as not meeting the definition of construction, renovation, modernization, thermo-modernization, reconstruction and maintenance will be taxed at the standard rate of 23% VAT.

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VAT rate for maintenance services in residential buildings - repair and maintenance of chimney sweeps in buildings covered by the social housing program

A natural person running a business provides repair, inspection, cleaning and maintenance services for chimney and ventilation pipes. The taxpayer completed a new order:

consisting in periodic inspection of chimney pipes;
maintenance works on chimney flues consisting in cleaning chimney flues and repairing plasters;
bricklaying work on chimney flues.

The works were carried out in buildings covered by the social housing program.

The taxpayer, by issuing an invoice for the above-mentioned services, would like to apply a reduced tax rate of 8% VAT. Will he be able to do this?

For service 1, the applicable VAT rate will be 23%, and for service 2, the taxpayer will be able to apply a reduced rate of 8% VAT.

The same position was adopted by the Director of the Tax Chamber in Katowice in the individual interpretation of May 12, 2011, ref. No. IBPP2 / 443-146 / 11 / ICz.

VAT rate for maintenance services in residential buildings - inspection and maintenance of a gas boiler

A natural person runs a business consisting in the installation of a gas installation (PKWIU 43.22.20.0) and its inspections and maintenance. The taxpayer also deals with the inspection and maintenance of gas stoves.

These services consist of:

checking the technical condition and correctness of connections;
cleaning the gas appliance;
maintenance of gas components;
device adjustment (tightening, lubrication and sealing of threaded connections);
checking the tightness and functioning of safety systems.

As a result of the above maintenance services, some components and parts are also replaced in some cases. However, their value excluding VAT included in the taxable amount of the maintenance work performed shall in no case exceed 50% of that base.

All services provided by the taxpayer concern only residential buildings of permanent residence (PKOB 11), where the area of residential premises in these buildings does not exceed the statutory limits.

However, the Director of the National Tax Information (KIS) in the individual ruling of October 31, 2019, ref. No. 0111-KDIB3-1.4012.567.2019.2.ICZ was of the opinion that the service of inspection, i.e. inspection of the technical condition of the gas furnace, was not mentioned in the provisions of the VAT Act or the Regulation of the Minister of Finance of December 23, 2013 on goods and services for which the VAT rate is lowered and the conditions for applying the reduced rates are lowered (§ 3 (1) of this regulation).

The performance of the above services (with the exception of the gas furnace maintenance service) cannot therefore be classified as construction, renovation, modernization, reconstruction or maintenance of buildings. Thus, these services will be taxed separately from the gas boiler maintenance service at a rate of 23% VAT.

On the other hand, the gas stove maintenance service in buildings covered by the social housing program will be subject to the reduced rate of 8% VAT as a maintenance service. However, the gas boiler inspection service will constitute a service subject to a separate tax rate of 23%.