New Residential, Converted and Charity Building

The VAT zero-rated treatment of new residential buildings is established in Arts. 45(9).

The VAT treatment of these categories falls amongst the categories left at the discretion of the MEMBER STATES.

[10) and (11) of the VAT Law respectively and the conditions and exclusions of zero-rating are laid out in Arts. 37, 38 and 39 of the Regulations respectively.

A residential building is a building designed for human occupation and is used as a residence by an individual, for example by students and armed forces. (Art. 37(1) of the Regulations)

The zero rating applies to the first supply of a residential building by way of sale or rental made within three years from the completion or construction of the building.

Excluded from the definition of residential building are buildings used for human occupation but not strictly residential such as hotels, and serviced apartments. hospitals, etc.; buildings constructed without authorization. Their supply will not qualify for VAT zero-rating. (Art. 37(2) of the Regulations).

A conversion of a building into a residential building is also VAT zero-rated unless the original building or any part of it was used as a residential building within 5 years of the conversion works commencing. (Art. 39 of the Regulations).

Also. the first sale of a building designed specifically to be used by a charity for a charitable purpose is zero-rated. A charitable purpose is a not-for-profit purpose.

(Art. 38 of the Regulations).

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