IVA on renovations: the 10% and 21% rules
By Ross Alinari · Last checked · Editorial policy · How we check facts
A renovation is not automatically eligible for reduced VAT because it takes place in a home. The applicable treatment depends on the transaction and the conditions in the current law. Article 91.Uno.2.10 of the LIVA deals with specified renovation and repair works, while article 90 establishes the general rate. The current consolidated text also contains changes that older summaries may not reflect. Use the legal conditions and the intended property use to assess the invoice, rather than selecting a rate from a headline.
Start with the recipient and use
The renovation provision includes a private individual who does not act as a business or professional and uses the home privately. It also expressly includes communities of owners and, in the current text checked for this guide, homes intended for letting as a principal residence irrespective of the landlord’s status. That wording must not be replaced with an older blanket statement that every rented property is excluded.
Describe the actual intended use when requesting tax treatment. A privately used second home, a principal-residence letting and tourist accommodation raise different questions. The existence of a residential address alone does not establish the relevant category. Ask the supplier to record the basis for the rate used and retain supporting information with the invoice. A renovation contractor’s estimate should not be treated as a ruling on an owner’s broader rental or business arrangements. Where the intended use changes during planning, revisit the tax assumption before agreeing the final contract.
Source: LIVA arts. 90 and 91.Uno.2.10(a).
Check the age condition
For the specified renovation and repair treatment, construction or rehabilitation of the dwelling must have finished at least two years before the works begin. This is a condition concerning the relevant building history. It is not a statement that two years must have passed since the current owner bought it, nor that every old-looking property necessarily qualifies.
Collect reliable documents that establish the relevant completion history and keep them with the scope. A recent substantial rehabilitation may require closer examination even where the original building is much older. If the available papers conflict, resolve that discrepancy before relying on the reduced rate. For an owner abroad, ask which document the supplier is using and retain a readable copy. This also helps distinguish the VAT assessment from the technical condition assessment: a building can satisfy an age requirement while still needing extensive design work, and tax eligibility says nothing about its safety or maintenance needs.
Source: LIVA art. 91.Uno.2.10(b).
Understand the material threshold
The contractor must either supply no materials or supply materials whose cost does not exceed 40% of the taxable base of the transaction. The provision refers to material cost, not a percentage chosen by labelling part of the final selling price as labour. An owner cannot establish eligibility merely by comparing two broad totals on an estimate.
Ask how the supplier has assessed the materials incorporated into the work and which transaction is being evaluated. A change to finishes or equipment may affect that assessment, so a revised specification should trigger a fresh check. Keep supply-only purchases and construction services clearly described. Avoid treating an artificial invoice split as a substitute for the legal conditions. This guide gives no material allowance for a kitchen or bathroom because the real composition of the work is what matters. The appropriate rate must follow the actual supply, recipient and evidence, including any applicable distinction between repair work and a different kind of transaction.
Source: LIVA art. 91.Uno.2.10(c).
Keep payment evidence
The current provision makes the reduced treatment conditional on payment through the methods it lists: credit or debit card, bank transfer, a nominative cheque or payment into the supplier’s account at a credit institution. This condition is easy to miss when consulting an older explanation that concentrates only on building age and material content.
Agree how payments will be documented before the work starts. Link each payment record to the relevant invoice and contract rather than relying on a bank statement with an unclear description. An overseas owner should also make sure that the person arranging payment has the correct supplier details and that a change request is independently checked through an established contact. These are practical record-keeping steps, not additional tax conditions invented by this guide. The legal requirement comes from the cited provision; the purpose of a clear document trail is to show which payment discharged which invoiced work when the tax treatment is later reviewed.
Source: LIVA art. 91.Uno.2.10(a).
Read guidance alongside the current law
The tax agency’s renovation page explains the general distinction between the standard rate and qualifying reduced-rate works, including the age and material conditions. However, the page checked during preparation still describes rental exclusions more broadly than the amended wording in the current consolidated LIVA. Treat that discrepancy as a reason to verify the relevant transaction against the current legislation, not as permission to combine whichever statements produce the lowest tax.
Do not rely on the unverified DGT ruling mentioned in earlier planning material. This guide does not cite it. Keep the legal article, the supplier’s explanation and the property-use evidence together. Where an invoice concerns a category outside straightforward private renovation, obtain an assessment of that category before payment. The point is to make the basis visible and reviewable; a generic online example cannot determine every mixed-use or contractual arrangement.
Source: AEAT: renovation and repair works.
Compare quotations on the same basis
A useful quotation separates the construction scope, the tax treatment and the assumptions supporting it. The general rate is 21%; the relevant reduced rate is 10% when the applicable statutory conditions are met. A lower displayed total created by an unsupported VAT assumption is not evidence that the same work costs less.
When comparing proposals, check whether they contain the same supplies and whether the rates rest on the same property-use and materials information. Record what happens if a specification change affects eligibility. For an owner managing a renovation remotely, this should be a deliberate decision before the final acceptance, rather than a surprise on the closing invoice. Our pricing process starts with a free estimate and proceeds to a fixed-price quote after a site visit. That process defines the construction proposal; the correct VAT remains tied to the actual transaction and current law. Keep final invoices and their supporting payment records with the property documents.
Source: LIVA arts. 90 and 91.Uno.2.10.
Worked example
A private owner plans qualifying repair work on a dwelling completed more than two years earlier. The supplier assesses incorporated materials at 35% of the taxable base and checks the remaining conditions, including payment method. If a specification change raises the materials share to 45%, the earlier assessment cannot simply be reused. These percentages are hypothetical illustrations of the statutory 40% test, not renovation prices or a determination of any customer's VAT position.