VAT on services connected with foreign property

Services Connected with Foreign Immovable Property

  1. Introduction
  2. What is immovable property?
  3. Services liable to VAT where immovable property is located
  4. Services liable to VAT where the supplier (or customer) is located
  5. VAT Registration for persons supplying services in relation to foreign immovable property
  6. Legislation
  7. Specific Services/Examples
  8. Further Information

1. Introduction

The VAT treatment of a service that is supplied in relation to a foreign* immovable ** property depends on the nature of the service and the extent of its connection with the property. While many services have a connection with property in the ordinary meaning of the words, certain services which are closely linked to particular properties are treated differently. These services are regarded, for VAT purposes, as connected with the property, and in respect of these a person supplying the services is normally required to register and account for VAT where the property is located. In the case of other services, the VAT treatment depends on the place where the supplier of the service has established a business or, in certain circumstances, where the customer has established a business or is resident.

The principal questions that this leaflet answers, for a supplier established in Ireland, are:

What services are regarded as being liable to VAT where an immovable property is located?

What services, connected with immovable property, are liable to Irish VAT?

And

Whether a person who supplies these services can recover VAT incurred in Ireland.

*This leaflet is primarily concerned with foreign property. Where reference is also made to Irish property, this will be clearly indicated.

** Any reference to 'property' in this leaflet means 'immovable property' as defined in Section 2 of the leaflet.

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2. What is immovable property?

For the purposes of this leaflet, immovable property means land; and any buildings or fixtures attached to the land including tenements, hereditaments, houses and buildings, walls, fences and any other permanent structures or fixtures; land covered by water; and any estate, right or interest in or over land.

[Machinery that is not installed as a fixture is regarded as movable goods, and does not come within the definition of immovable property for the purposes of this leaflet.]

Foreign immovable property includes any of the above located outside of the territory of the State; and more specifically includes any of the following: holiday homes, time-share properties, investment properties and hotels.

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3. Services liable to VAT where immovable property is located

3.1 Services are not liable to Irish VAT if they are regarded, for VAT purposes, as connected with a foreign immovable property. When determining whether such connection exists, it is necessary to examine the nature of the service. A service may be regarded, for VAT purposes, as connected with the property when it is supplied in relation to a particular property, and is not a service related to property in general. Any fees charged in respect of such a service are liable to VAT by reference to the location of the property – where the property is located abroad, the fees will not be subject to Irish VAT.

3.2 Services that are regarded, for VAT purposes, as connected with foreign immovable property include those that have a direct physical link with the property, and require the presence of personnel or facilities there. These include:

  • The surveying of a site or property;
  • Security or supervision on a site or property;
  • The construction, development, repair, maintenance (including decoration), demolition, conversion or alteration of a property.

Services of this nature are generally supplied by:

  • Surveyors
  • Architects
  • Engineers
  • Decorators
  • Interior designers
  • Security companies
  • Site supervisors
  • Property management companies

3.3 Services are also regarded for VAT purposes as directly connected with a foreign immovable property if they involve:

  • The sale of a property;
  • The assignment or surrender of any interest in the property (e.g. a lease);
  • The granting of any right or licence in relation to the property;
  • The letting, including short-term holiday letting, of a property

These services are usually provided by

  • Auctioneers;
  • Solicitors or other legal professionals.
  • Estate agents;
  • Any other agents connected with the transaction;
  • Tour operators.

3.4 It should be noted that estate agents, architects etc., may also provide services that are not regarded, for VAT purposes, as connected with specific immovable properties. For example, estate agents may provide general marketing services in relation to foreign developments, and architects may provide designs to be used as a template for the construction of houses in several different countries. See Paragraph 4 for details of the treatment of services of this nature.

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4. Services liable to VAT where the supplier (or customer) is located

Services that have no direct physical link with a foreign immovable property, and do not involve the transfer of any interest in the property, are not generally regarded, for VAT purposes, as connected with a property. These services include:

  • General advertising of property;
  • Marketing of property, including the holding of exhibitions. However where negotiation of contracts for the sale of properties takes place at an exhibition, any deposit or similar fee paid in respect of such a contract is regarded as being connected with the property;
  • The securing of purchasers where this does not form part of the process of negotiating for the sale of specific properties;
  • Advice and information relating to land prices or property markets which do not relate to specific properties;
  • Feasibility studies of the commercial potential of development etc. in a geographical area;
  • Any other general consultancy or advice service in relation to foreign property.

These services are liable to Irish VAT if the supplier is established in the State. However, where any of the services listed above are also included in the Fourth Schedule to the VAT Act, where such services are supplied to customers established outside the State, and are used by them for business purposes, they are liable to VAT by reference to the place of establishment of the customer – effectively, they may be zero-rated for Irish VAT purposes. These include the provision of legal advice, the provision of information, advertising and marketing. A supplier of these Fourth Schedule services may still register for VAT in Ireland, even if he/she has no other taxable activities in the State. An Information Leaflet on the subject of Fourth Schedule Services is available on the Revenue website.

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5. VAT Registration for persons supplying services in relation to foreign immovable property

A trader who is established in Ireland and who supplies services that are regarded, for VAT purposes, as connected with a foreign immovable property (i.e. regarded for VAT purposes as taxable where the property is located) may incur VAT in Ireland in the course of supplying these services. To recover this VAT, he/she should register for VAT, and claim it back by way of the VAT Return. This applies even if the person makes no supplies in Ireland, and would not otherwise be entitled to register for VAT.

In these cases, registration applications will be accepted subject to the proof that the trader does in fact supply services that are regarded as taxable abroad in respect of which he/she would have been entitled to recover VAT had he/she supplied the same services in Ireland.

Traders who are already registered in respect of the provision of services in the State, such as estate agents who provide services in Ireland and also services regarded, for VAT purposes, as connected with foreign property, should similarly recover all VAT incurred in relation to all those services in their normal VAT return.

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6. Legislation

Section 5(5) of the VAT Act 1972 (as amended) sets out the general rule that the place of supply of a service is the place where the person supplying the service has his/her establishment.

Section 5(6)(a) of the Act sets out the special provision that the place of supply of services connected with immovable goods, including the services of estate agents, architects and firms providing on-site supervision, is where the immovable goods are situated.

Section 5(6)(e) provides that the place of supply of certain services (listed in the Fourth Schedule to the VAT Act), when those services are received for business purposes, is the place where the customer has an establishment or, if the customer has more than one establishment, the establishment where the services are most directly used.

Section 12(1)(b)(iii) provides that a person who supplies services outside the State is entitled to recover VAT incurred (in Ireland) in relation to these services to the extent that he/she would have been entitled to recover the VAT if the services had been supplied in Ireland.

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7. Specific Services / Examples

7.1 Property exhibition held in Ireland

In all circumstances, where an admission fee is charged to a property exhibition, this is subject to Irish VAT at the standard rate. Any person charging such a fee should register and account for VAT, subject to the usual registration thresholds. The following examples are dealt with on the basis that no admission fee is charged:

  • (a) An exhibition is staged by a person selling, or supplying an interest in, immovable property abroad:
    Where the person staging the exhibition is also the person supplying the interest in foreign property, no taxable supply is taking place in Ireland. If the person is established in Ireland, he/she may register for VAT and thus reclaim any VAT incurred in holding the exhibition by way of the usual VAT return.
  • (b) An exhibition is staged on behalf of a person selling, or supplying an interest in, immovable property abroad:
    Where the person staging the exhibition does not own the property, he/she is providing a marketing service to the owner of the property. If the owner is established in Ireland, then this marketing service is liable to Irish VAT at the standard rate. The owner of the property in this case may register for VAT, and reclaim any VAT charged to him/her. If the owner is not established in Ireland, then the person staging the exhibition should charge VAT at zero %, as services of this nature are liable to tax where the customer is established in accordance with the Fourth Schedule to the VAT Act 1972 (as amended).

Any actual sale or negotiation of contracts in respect of foreign property taking place at an exhibition is liable to VAT by reference to the location of the property, and not where the sale takes place. Accordingly there is no Irish VAT due on deposits, arrangement fees or similar fees paid in respect of these sales.

7.2 Estate Agent acting for developer of foreign immovable property

Any services provided by an estate agent established in Ireland that are regarded, for VAT purposes, as connected with the sale of a foreign property are liable to VAT by reference to the location of the property. The fees charged are therefore not liable to Irish VAT. (The agent may be required to register for tax where the property is located, subject to the rules in that State). The estate agent, however, may register for VAT in Ireland for the purpose of reclaiming any VAT incurred in the course of arranging the sale. If the estate agent is already registered in Ireland, then he/she should reclaim any VAT through the VAT return as though it was incurred in the course of his/her domestic activities. An estate agent not established in the State may be entitled to recover VAT incurred under the 8th or 13th VAT Directives, and should contact the Unregistered VAT Repayments Section, River House, Charlotte's Quay, Limerick in this regard.

7.3 Services of a solicitor in connection with immovable property

Where the solicitor’s services are supplied in connection with the transfer of an interest in property, including the drawing up of a contract in relation to such a transfer, they are liable to VAT where the property is located. If the property is located in a country other than Ireland, the solicitor may be required to register for VAT (or an equivalent tax) in that country.

Fees charged by a solicitor established in Ireland in respect of services not regarded, for VAT purposes, as connected with property are generally liable to VAT as follows:

  1. If the client is established or resident in Ireland, then Irish VAT applies.
  2. If the client is established in the E.U., and the client is acting in a private capacity, Irish VAT applies.
  3. If the client is established in the E.U. and is acting in a business capacity, the services are zero rated, i.e. no VAT is charged by the Irish solicitor, and the client accounts for the VAT in his/her own country as if he/she had made the supply.
  4. If the client is established outside the E.U., the services are zero rated for VAT.

7.3.1 Solicitor acting for a company with immovable property in different countries

Where a company engages a solicitor established in Ireland to act on its behalf in relation to transactions involving property that it owns in different countries, the VAT treatment depends on the nature of the transaction.

If, for example, the company wishes to mortgage any or all immovable property, including property located in Ireland, this transaction is not considered to be a service connected with property in the terms of paragraph 4 above, and therefore legal services supplied in connection with this transaction are taxable subject to the general rules governing legal services; i.e. if the company is established in Ireland, then Irish VAT applies; if the company is established outside Ireland, then the supply can be zero-rated for VAT. It should be noted that if the company has an establishment in Ireland and also in another country, the VAT treatment would depend on which establishment most directly uses the services supplied.

If, on the other hand, the company wishes to dispose of any immovable property, any legal work done by the solicitor directly in connection with the disposal of individual properties is liable to VAT where the properties are located, and the solicitor may be required to register for VAT in each country. In a situation where the actual disposal is carried out by local solicitors under the instruction of the Irish solicitor, it is only the services of these local solicitors that are regarded as being liable to VAT where the property is located. The services of the Irish solicitor in providing instruction to the local solicitors, or in providing other services such as legal advice regarding the sale, procurement of valuations, etc., are liable to VAT subject to the general rules set out in paragraph 7.3.

7.3.2 Solicitor acting for estates

Legal services supplied to a private (non-business) client in connection with the general administration of an estate are liable to VAT by reference to the place of establishment of the solicitor – if the solicitor is established in Ireland, and the client is established in Ireland or in another Member State of the E.U. then Irish VAT applies. However, if the client is established or resident outside the E.U., the fees can be zero-rated for VAT. The general administration of the estate may include services provided in relation to property, but not regarded, for VAT purposes, as connected with it, such as defending legal claims made against the estate in respect of the title to any land.

However, services supplied by a solicitor connected with the disposal of any property that forms part of the estate are in all cases liable to VAT by reference to the location of the property. If a person resident outside the country is the beneficiary of an estate that includes land or other property in Ireland, and that person engages a solicitor established in Ireland to sell or let the property, then the solicitor’s fees are liable to Irish VAT. Similarly, if the land in the above example is located in another country, then the fees charged are liable to VAT by reference to the rules in place in that country, and no Irish VAT applies to the Irish solicitors’ fees.

Where a solicitor established in Ireland supplies legal services to a client resident outside the E.U., and these consist in part of services regarded, for VAT purposes, as connected with the property as set out above, and in part of services which are not so connected, this should be treated as a multiple supply, and the fee should be split to show those services liable to Irish VAT separately from those which are zero-rated.

7.4 Property management companies

Where a company established in Ireland is engaged to manage immovable properties outside the State, these services are liable to VAT by reference to the location of the property. In this context, ‘management’ includes (but is not limited to)

  • Supervision and maintenance of the property;
  • Administration of rents, service charges and insurance charges;
  • Control or administration of lettings.

A company providing these services may register for VAT in Ireland for the purpose of reclaiming any VAT incurred here in the course of providing the services.

Further Information

Enquiries regarding any issue contained in this Information Leaflet should be addressed to the Revenue District responsible for the taxpayer's affairs. Contact details for all Revenue Districts.

This leaflet is issued by:
VAT Appeals and Communications Branch,
Indirect Taxes Division,
Dublin Castle.

December 2008

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