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A company enquired whether sewage and paving renovation works for a local council allowed for the application of the reverse charge mechanism. The DGT ruled that it does not apply, as the works do not qualify as land development and the local council is not acting as a business entity.
Question raised: Concept of land development. Reverse charge mechanism.
The reverse charge mechanism requires that the works consist of construction, rehabilitation, or land development, and that the recipient be a business or professional. Sewerage renewal and paving works do not appear to constitute new development or substantial reform of urbanized land. Furthermore, a City Council is not considered a business if it lacks commercial nature and does not receive consideration, acting instead as the final consumer.
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