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Read in: 4 minVAT taxation of goods delivery with installation / assembly
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- Published: 16.04.2024
- Read in: 3 min
Ordering furniture with delivery services or electrical and/or electronic devices along with the installation of the device is a common comprehensive service offered by many companies. However, when it comes to VAT settlements from such transactions, the question often arises – how to do it correctly? The matter can seem even more complicated if the entrepreneur provides goods deliveries with installation and/or assembly services to the end customer in a country different from the service provider’s country.
Here, however, we offer help, because from this article you will learn:
- The significance of the place of taxation in the VAT settlement of goods delivery with installation and/or assembly.
- The definition of assembly/installation.
- Whether a delivery transaction with assembly/installation should be treated as a supply of goods or a provision of service.
Tax Liability and Goods Delivery with Installation/Assembly - Place of Taxation
The first factor playing a key role in the VAT settlement of goods delivery with installation/assembly is the place of taxation (the place of service provision) of such a transaction. Tax regulations contain special rules concerning the VAT taxation of goods deliveries that are assembled or installed by the supplier.
Specifically, such a delivery is not treated as an intra-Community supply of goods (ICS). As a result, the 0% VAT rate does not apply to it, and it is not listed in the EU VAT Summary Information.
For sales to private individuals, the VAT OSS procedure and rules for taxing retail e-commerce sales do not apply to this type of delivery either.
It is assumed, however, that a cross-border delivery is subject to VAT in the country where the goods are installed. For example, a seller from Poland delivers a controller for an automatic garden irrigation system along with its assembly. The assembly takes place at a private individual’s home in Germany and requires specialized technical knowledge and the calibration of the device. The seller must register for VAT purposes in Germany and tax the transaction according to local regulations.
Additionally, according to Article 10(1)(3)(b) of the VAT Act, in the case of buyers, the delivery of goods with assembly is not treated as an intra-Community acquisition of goods (ICA).
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Schedule a consultationDefinition of Assembly/Installation
Before determining the place of taxation, it is necessary to establish whether assembly activities meet the statutory definition. Not every technical activity constitutes assembly within the meaning of the VAT Act regulations.
Simple activities that enable the functioning of a given good/device, which a potential Polish purchaser could perform independently, are not considered assembly.
For example, the delivery of furniture (e.g., a table), where the assembly consists of screwing the table legs to the tabletop, will not be treated as a delivery of goods with assembly. Such a delivery to a foreign contractor can therefore be settled on the general principles of goods delivery taxation (e.g., under the VAT OSS procedure).
Supply of goods or provision of service?
In analyzing the VAT taxation principles, it is also necessary to determine whether the transaction in question constitutes a supply of goods or a provision of services.
For example, tax interpretations indicate that the delivery of built-in furniture, which includes design, transport, and assembly, should be classified as a comprehensive provision of services. It is assumed that the “service element” has a predominant character when assessing the nature of a particular transaction.
Such a transaction should therefore be classified as a provision of services, and the taxation rules applicable to the provision of services should be applied. In particular, it should be determined whether the service constitutes a service related to real estate and what is the status of the buyer (whether they are an active VAT taxpayer as defined in Article 28a of the VAT Act).
How to settle delivery with assembly? - summary
Sellers offering goods along with assembly/installation must be aware that tax regulations contain special rules for taxing such transactions. For example, such deliveries cannot be settled under the VAT OSS procedure. Each time, therefore, it is necessary to assess the nature of the activities performed and the tax implications in the country where the goods assembly (device installation) takes place. In some cases, carrying out such deliveries may lead to the obligation to register for VAT purposes in other EU countries.
If you need support with VAT or VAT OSS issues, such as registrations, declarations, settlements, or with e-commerce accounting, schedule a consultation, and our VAT Compliance specialists will take care of the rest!
