When Do You Apply the Low and High VAT Rate in Construction?

If you're self-employed and working in the construction sector in the Netherlands, you need to know about the different VAT (Value Added Tax) rates for construction. The standard VAT rate is 21%, but in construction, the rate can change depending on the type of work you’re doing. So, how do you know when to charge the low VAT rate and when to charge the high one? Let’s break it down for you.

Building Materials: High VAT Rate

When it comes to building materials, you always charge the high VAT rate of 21%. It’s important to keep track of what you charge for your hours and what you charge for materials because they have different VAT rates. This also makes it easier for your accountant to manage your finances.

Which VAT Rates Apply in Construction?

1. VAT Reverse Charge for Subcontractors
   If you’re a subcontractor, things work a bit differently. Usually, you don’t add VAT to your invoice. Instead, you write "VAT reversed" on the invoice and include the VAT number of the main contractor. This means the main contractor is responsible for paying the VAT instead of you.

2. Insulation: Low or High VAT Rate?
   Insulation work can either have the low or high VAT rate. For homes older than two years, insulation that improves energy efficiency is taxed at the lower rate of 9%. This includes insulation for floors, walls, and roofs. However, if you’re working on doors, window frames, or thatched roofs, you’ll need to charge the full 21% VAT rate. Sounds complicated, but it’s important to know the difference!

3. Cleaning: Low or High VAT Rate?
   If you’re cleaning the inside of a house, you can charge the lower 9% VAT rate. But, if you’re cleaning the outside of the house, like windows or exterior walls, you have to charge the higher 21% VAT rate. It doesn’t matter how old the house is for this rule.

4. Painting and Wallpapering: Low or High VAT Rate?
   For houses that are older than two years, you charge 9% VAT on your labor for painting, wallpapering, or any prep work like sanding. However, you still have to charge 21% VAT for the cost of the materials.

5. Plastering: Low or High VAT Rate?
   Just like painting, if the house is older than two years, you charge the reduced 9% VAT rate for plastering. This includes any prep work, like getting the walls ready. But if you’re installing plasterboard or tiling the walls, you’ll need to charge the higher 21% VAT rate.