Application of reversed VAT 

The reversed VAT liability for construction services applies to such construction services directed to real estate or land, a building or a permanent structure, which, for example, are related to:

• for soil and foundations
• for the construction of all types of buildings and structures, repair construction, basic improvement and restoration work, demolition work
• for building installation work (HVAC installations, insulation work)
• for construction finishing works (construction carpentry installations, floor and wall covering, painting and glazing)
• for renting construction machines with users
• for hiring labor for construction services

Reverse tax liability not applicable for example to the following services:

• installation and erection of machines and equipment serving production or other special activities, as well as maintenance
• planting and maintenance of green areas
• sampling, test drilling, descriptions of pipelines, measurements, inspections, inspections
• architectural services
• project management/work management or other similar service
• building and structural design and other engineering services and technical design
• rental of construction machinery without a driver or machine operator
• cleaning of outdoor spaces (roads, airports, markets, parks, etc.)
• transport services
• sale of installed laundry machines for a residential apartment building
• removal of construction waste
• removal of contaminated lands
• sale of crushing service
• soil excavation and blasting in connection with mining and stone processing operations
• earth material transfers, loading, screening, etc. in the gravel collection area. similar jobs
• forest tillage
• property maintenance at the construction site, e.g. snow removal from the yard area (snow removal from buildings under construction is covered by the insured)
• sewer services and descriptions
• the smell of fireplaces and air conditioning
• unloading or loading of goods or construction material related to transport
• clearing of trees from electricity and telephone lines
• clearing of trees and undergrowth (clearing the construction site is a construction service)
• ice road construction.

The tax liability of the buyer of the construction service is regulated in section 8c of the AVL. The seller must find out carefully whether the buyer meets these conditions so that the seller can act correctly. In cases of doubt, the seller must ask the buyer for an explanation.

Property management is not a construction service. Property management service usually refers to a continuous service package, which includes e.g. cleaning, premises maintenance, snow plowing, sandblasting, maintenance of the heating system, ventilation and air conditioning, cleaning service and small repairs.

Small repairs are often part of the standard property management contract and are not charged separately. If repair services are charged separately, they are considered a construction service.

Elevator repair and maintenance is a construction service. Cleaning during construction and final cleaning are construction services.

In general, the inverted system is not applied to transport services. Thus, for example, transporting construction material to or from the construction site with a truck or tractor is not a construction service.

Moving or transporting construction material within the construction site with a construction machine is instead a construction service. According to the current instructions of the Tax Administration, the transfer of construction material at the construction site by truck or traffic tractor is also a construction service.

If the service only includes services related to road maintenance, such as snow plowing, sandblasting, salting, changing traffic signs, mowing road pavements and clearing bushes, the service is not considered a construction service. Construction services, on the other hand, are road asphalting or other basic repairs.

The care and maintenance of roads can also be carried out in the so-called with the help of the life cycle model as a comprehensive care service referred to in section 29 of the AVL. The overall maintenance service refers to the construction and maintenance service of a public road or railway, the consideration for which is determined on the basis of the traffic volume or other equivalent performance volume describing the use of the road or railway.

The sale of a total treatment service is not considered a construction service. A tax is paid to the state for handing over the overall care service (AVL 29.1 § 9 k).

Construction, repair and maintenance of railways are construction and subject to reverse tax liability. If railway maintenance work cannot be separated from repair and maintenance, these works are also included in the reverse tax liability according to the main performance.

The sale of concrete is considered a sale of the material when, after being transported to the site, it is unloaded by pumping it to the casting site with a boom, with a chute, as a belt unloader or directly into a receiving hopper.

The sale of concrete is considered the sale of a construction service only when the seller of concrete also spreads and/or levels the concrete, makes pouring slopes or otherwise participates in the post-demolition construction work aimed at pouring the concrete.

Similar principles also apply to deliveries of light gravel (lecasora) if it is pumped to its final destination.

The delivery of blown wool is the sale of a construction service, because the seller participates in blowing and spreading the wool at the installation location and it is blown directly to its final location.

If the sale of the goods includes only minor installation, the entire delivery can be considered as the delivery of the goods. For example, kitchen appliances such as a refrigerator, freezer or
the sale of the dishwasher installed is considered the delivery of the goods.

Also, selling signboards, shields, fans, additional lights, foam extinguishers and the like attached with various screws and glues or other such means is not a construction service (due to the small amount of installation work).

Instead, for example, the delivery of an oven or stove that is permanently installed in furniture, which also includes installation, is considered a sale of a construction service. If the sale and installation of kitchen furniture also includes the sale and installation of household appliances, the entire service is considered a sale of a construction service.

Construction services are only construction and repair services aimed at the property. Work on real estate that is not done for the purpose of construction or repair is not a construction service. For example, rock blasting or quarrying work for the manufacture and sale of crushed stone or gravel is not a construction service, so reverse tax liability is not applied to the work of the subcontractor performing the excavation. The same procedure also applies to earthmoving, loading, screening and other tasks performed in the gravel collection area. similar jobs.

On the other hand, for example, blasting and excavation work performed at a house building or civil engineering site are subject to reverse tax liability, even though the aggregate would also be made into crushed stone for sale.

Machines and equipment that serve special activities carried out on the property do not belong to the property. Reversed tax liability does not apply to the installation work, repair and maintenance of these devices.

In Section 28.2 of the AVL, special activity means any economic activity carried out with machines and equipment and furniture, e.g. production or commercial activities, performance of services, etc. It is essential that these goods do not serve the normal use of the building/property, but the economic or other activities carried out there, such as education.

In workforce leasing, the lessor leases personnel for the customer's use. The customer is responsible for the supervision and work tasks of the hired person, as is the case with a regular employee. The lessor charges the customer, for example, according to the working hours used.

If the hired workforce is used to perform construction services, the rental is subject to reverse tax liability. If the hired workforce is used in such a way that the same workforce is also used for e.g. erecting scaffolding, but mainly for the performance of construction services, the rental is considered to be subject to the reverse tax liability according to the main performance.

Movable construction facilities located on the construction site, such as social facilities, warehouses, and offices, are not permanent structures, and they do not become permanent parts of the property. Reverse tax liability is not applied to their erection, dismantling and other work performed on them, as well as maintenance.

Scaffolding, construction roofs, construction fences, control gates, cranes, site electrical main centers and site construction elevators are also temporary structures and do not form parts of the property. Reverse tax liability is therefore not applied to their installation or dismantling. Also, the reverse tax liability is not applied to their rental.

Inverted tax liability is also not applied to, for example, construction services related to the erection and dismantling of temporary (not intended for permanent use), such as barracks intended for day care or school use.

If a foreign entrepreneur establishes a permanent establishment in Finland, he must apply to become a taxable person. In that case, the general rules of the VAT Act apply to him as well as other taxpayers, e.g. reverse charge compliance.

If a Finnish entrepreneur sells construction services in Finland to a foreign entrepreneur who sells construction services other than occasionally, reverse tax liability applies to the sale (AVL § 8 c).

If a foreign entrepreneur sells a construction service to another foreign entrepreneur in Finland (and neither of them has registered or applied to be a taxable person), reverse tax liability is applied to the sale, if the buyer sells construction services other than occasionally (AVL § 9 subsection 3).

However, the foreign buyer must register as a person liable to report the reversed tax liability. In this case, the foreign trader must declare the purchases covered by reverse tax liability and the taxes to be paid and deducted from them in the seasonal tax return. A foreign trader does not need to register as a VAT taxpayer as a seller or a buyer, but he can voluntarily apply to be a taxpayer.