Changes to VAT Treatment of Utilities and Service Charges from January 2025

• VAT on service charges will be implemented starting January 1, 2025
• Thijs Bijlard, a tax director and VAT specialist, discusses updates to the VAT real estate decision made in December 2023
• Until December 31, 2024, the treatment of service charges in commercial real estate and residential rentals varies
• In commercial real estate, service charges are often considered separate taxable supplies and are subject to VAT
• For residential rentals, service charges are usually part of the VAT-exempt rental service
• From January 1, 2025, the distinction between commercial and residential service charges will no longer matter
• The focus will be on whether service charges are independent services or incidental to the rental service
• The terms of the lease agreement will play a crucial role in this determination
• If service charges are independent, they are usually subject to VAT
• This applies when tenants can choose their service provider or have individual meters to measure actual consumption of utilities like gas, water, and electricity
• If service charges are incidental to the rental, they follow the VAT status of the rental itself, either taxed or exempt depending on the rental’s VAT status

Source: vanoers.nl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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