VAT regulation on “goods of significant value”

In circular letter no. 15/E of 12 July 2018, the Revenue Office goes into the so-called “beni di valore significativo” (goods of significant value). It includes important clarifications, since the management of such goods of significant value has always been very difficult for VAT regulation purposes and, particularly, for the purposes of the application of a reduced rate, leading to a non-straightforward regulatory framework.

The application of a reduced rate in the construction industry in case of goods with significant value was firstly introduced with Directive 1999/85/EC of 22 October 1999, which, with the aim of fighting unemployment, increasing jobs and discovering on-the-side activities, allowed EU Member states to apply a reduced VAT rate on labour-intensive services, particularly in the construction industry (Renovation and repairing of private dwellings).

When implementing Directive 1999/85/EC in the Italian regulation, the need to define “goods of significant value” arose and Ministerial Decree of 29 December 1999 considered as such: lifts and freight elevators, internal and external fixtures, boilers, video intercoms, air conditioning and recycling equipment, bathroom sanitary appliances and taps, safety systems. When such goods are used in the realization of some renovation activities, the taxable base, on which a 10% rate can be applied, can be determined through some calculations.

In terms of simplification, the “goods of significant value” provided within the service supply can be completely subject to the 10% rate only if their value does not exceed half of that of the entire services supply.  If the value of the goods exceeds half of the value of the supply, the tax benefit applies up to this limit. Therefore, it is clear that the value assigned to goods of significant value is the basis for the determination of tax.

For further information, contact Mario Spera.