Architects' fees for projects or site supervision are subject to 21% VAT

The application of the reduced tax rate in operations related to the construction and renovation of buildings has raised various doubts regarding the scope of professional services. Recently, the Directorate General of Taxes (DGT) has issued a ruling that delimits the boundary between construction works and technical architectural services.

What the DGT has ruled

The query presented focused on determining whether services provided by an architect for the drafting of a technical project should be taxed at the reduced rate of 10%. Following an analysis of the regulations, the DGT has ruled that fees derived from the drafting of a project or from site supervision do not qualify as construction or renovation works.

As they do not fit the definition of construction works, these services cannot benefit from the 10% tax rate provided for in Article 91 of Law 37/1992. Consequently, the provision of these professional services is subject to the general tax rate of 21%.

What this means for you

This ruling has a direct impact on individuals managing renovation or construction projects in their homes. If you hire a professional to design the technical project or to supervise the execution of the works, you must take into account that the invoice for their professional fees will include 21% VAT.

It is fundamental to distinguish between the builder's invoice, which could apply the reduced rate to the physical execution of the works, and the architect's invoice, which, due to the nature of their professional activity, must apply the general rate.

What you should do

When planning a construction or renovation project, it is necessary to consider the tax impact of professional costs on the total budget. It is recommended to:

• Clearly differentiate construction costs from technical service costs in financial planning.
• Verify that the professional's invoice correctly reflects the 21% tax rate to avoid tax contingencies.
• Assess each particular situation and the composition of contracts to ensure compliance with current regulations.