Q:
Marie
I am sorry to hear of your bereavement, and send my sincere condolences.
Thank you very much for your answer regarding the installed goods simplified procedure. Could I please ask one more question re installed goods?
I understand the place of supply for ‘installed goods’ is the country of installation. However the place of supply for ‘work on moveable goods’, if B2B, is the country of the customer (which in most cases will be the same place).
My confusion arises from if we in the UK have a contract to maintain/upgrade a machine in another EC state, which involves an element of installing new parts. We commission a contractor from another EC state to effect the work. If this is deemed to be ‘installed goods’ then we need to register in the state of installation. If however it is ‘work on movable goods’ then the contractor would send us an invoice without VAT, which we would reverse charge (as the recipient of the B2B service).
When does a contract for ‘work on movable goods’ become a contract for ‘installed or assembled goods’? Are there any guidlines, eg parts as a % of total job? Or is the installation of parts during maintenance or upgrade procedures not classed as ‘installed goods’?
Thanks again
Robert
Q:
The above scenario, in it’s simplest form, would be:
1. UK VAT registered repairer is asked to go to Belgium to repair a machine. The place of supply of his service is therefore (B2B) Belgium, so the UK co sends an OSS invoice which the Belgian customer reverse charges. UK co has no obligation to register in Belgium; or
2. UK co enters a contract to supply and install parts in the machine in Belgium, so has an obligation to register in Belgium under the ‘supply and install’ rules; but what if
3. UK co carries out the work on goods as in 1. above, but as part of the repair he is required to install parts to repair the engine. Is this ‘work on goods’ (ie reverse charge applies, no need for UK co to register in Belgium) or ‘supply and install’ (ie UK co must register in Belgium)
Thanks again
Robert
A:
Hi Robert
You never ask easy ones and EC VAT isn’t my favourite subject!
I’m not aware of any rule/percentage split that enables you to treat something as a supply of installed goods as opposed to work on goods, or vice versa, particularly in the cases you mention. It may exist but I’ve not seen it.
But I actually think that there is another factor involved in your situation that means your “upgrade” query isn’t an issue.
This is how I understand the basic rules. If you install a machine in a building, the place of the supply and installation would take place in the country where the machine is installed. And as you know, the simplification procedure will apply to that initial supply and installation if the country concerned has applied it.
But it’s at this point where things change. And it’s because once the machine becomes installed as a fixture, it becomes part of the land, and therefore “immovable property” which means that it is regarded as land. And yes, you’ve guessed it, there is a different place of supply rule for work on land.
Place of supply of services relating to land
The place of supply for services relating to land is where the land is located. This is explained in section 6 of VAT Notice 741a: Place of Supply of Services. This means that suppliers are normally required to register for VAT in the country where the land is based. And while work on land isn’t covered by the simplification for installed or assembled goods, some EC countries allow VAT registered recipients of such services (ie work on land) to account for VAT under the reverse charge so that the supplier doesn’t have to register in that country.
So the issue is whether or not the work that is being carried out is defined as work on goods or work on land.
Tangible movable property or immovable property?
Section 8.5 of VAT Notice 741A explains what is regarded as work on goods as opposed to installed goods as far as the UK is concerned. Goods are defined as “tangible movable property” but “does not include immoveable property such as permanently installed goods and fixtures”. The definition of “work on goods” in para 8.5.2 is quite extensive and includes alterations as well as repairs and other work. So if it involves work on “fixtures” then it becomes a supply of work relating to land and the place of supply is in that country. If the work doesn’t involve work on “fixtures”, then as far as I can see it’s work on goods – and thus services relating to movable property – and the supplier isn’t liable to register for VAT if the customer is registered for VAT and can account for reverse charge VAT.
So if you are “installing” an upgrade to a machine and the machine is a permanently installed fixture, the place supply would be where the machine is located as it’s a service relating to immovable property. If the machine is movable property – ie not a fixture, then the supply would be a supply of services covered by the “work on goods” rule.
I’m sorry I can’t give individual answers to each of your scenarios – it would take me some time to do so, although of course I’d be happy to help through my formal consultancy service if you need more detailed information. And as always with these issues, each country will interpret the term “immovable property” differently so you might want to ask your customers how they understand their local rules to apply. In most cases they will be able to account for local VAT under the reverse charge which would avoid the need to register in the country concerned.
Marie