How much VAT is paid when renovating an apartment?

Sep. 2022 Reforms

You’ve decided you want to renovate your home, but you still have one question: How much VAT do I have to pay for renovating an apartment? This can sometimes be confusing, so let’s explain the two types of VAT that currently apply to apartment renovations. [segundo_banner_blog_esp]

The two VAT rates for apartment renovations: 10% or 21%?

First, it’s important to know that VAT isn’t a fixed tax, but rather a variable percentage applied to invoices. In the context of home renovations , depending on the conditions we’ll discuss shortly, this percentage can be either 21% or 10%. Home insurance policies typically offer coverage for various repairs. Whether you pay for the repairs yourself or through your insurance company, the cost will be subject to VAT, although the rate will differ. The final amount is determined by who pays for the repairs and who contracts the work.

#First idea: If you hire the services yourself, you are the holder of the invoice issued by the professional and responsible for paying it. Therefore, a reduced VAT rate of 10% will apply.

When is it usually applied?

In renovation and repair works of homes for private use, provided that these characteristics are met:

The renovation must be carried out by an individual , not a company or corporation, and the property must be used as a residence. Therefore, if you have purchased or rented a commercial property to establish your business with the intention of renovating it, in this case, it will be taxed at 21%.
That at least two years have passed since the construction (or last renovation) of the home where the comprehensive renovation will be carried out.
The cost of materials should not exceed 40% of the taxable amount (cost) of the project. The good news is that typical renovation materials (bricks, cement, window frames, tiles, etc.) usually don’t exceed this 40% threshold because it would result in a minimal profit for the contractor.

#Second idea: However, in other cases where these conditions are not met or if your insurer is responsible for locating, hiring and paying the workers, the VAT is 21%.

In more specific situations , the reduced rate may apply , as indicated on this official website. But in summary, if you are an individual and the property is two years old or two years have passed since the last renovation, you can benefit from the reduced VAT rate on all masonry work and improvements such as plumbing, electrical work, carpentry, painting, plaster ceilings, etc. In cases where the insurance company or another business contracts the repair services, the applicable VAT rate is 21%. In this case, the entity that requested the repairs is the one that receives the repair guarantee, as the invoice is issued in its name. Logically, if the party responsible for repairing the damage is an insurance company, we will not have to worry about the applicable tax, since the professional relationship is between companies and they must follow their own protocols regarding current regulations. Therefore, a good idea when taking out home insurance is to ensure that it not only protects our home from the worst that can happen, but also from other everyday aspects that have a cost to our pocket that, in most cases, is unforeseen. If your needs are different and you want to take advantage of the VAT rate for renovating a small apartment, but you’re not quite sure how, we can help you. If you have any further questions, we can assist you personally and answer them. Because before starting a renovation, it’s important that you feel confident and at ease. How can you enjoy it if you don’t? [banner_blog_esp]