VAT and reverse charge for works - Tax ruling - 04/21/2021

Question :

Is a photovoltaic park considered real property under the VAT self-assessment scheme provided for in Article 283, 2 nonies of the General Tax Code (CGI)?

Answer:

Under Article 283, 2 nonies of the CGI, “For construction works, including those of repair, cleaning, maintenance, transformation, and demolition carried out in connection with real estate by a subcontracting company, within the meaning of Article 1 of Law No. 75-1334 of December 31, 1975, on subcontracting, on behalf of a liable lessee, the [VAT] is paid by the lessee.”

The qualification of real property for VAT rules depends on factual elements that must be assessed on a case-by-case basis, depending on the circumstances of the case.

The Implementing Regulation (EU) No. 1042/2013 of the Council of October 7, 2013, amending Implementing Regulation (EU) No. 282/2011 regarding the place of supply of services applicable since January 1, 2017, determines in its Article 13 ter the criteria for identifying whether a construction falls into the category of real estate. These criteria are not cumulative, so it is not necessary to check all of them.

It follows from point b) of Article 13 ter of Implementing Regulation (EU) No. 1042/2013 of the Council that “all buildings or constructions fixed to the ground or in the ground above or below sea level, which cannot be easily dismantled or moved” are considered real property.

For the application of this provision, two elements must therefore be met: on the one hand, the installation in question must constitute real estate or construction, and on the other hand, this structure cannot be easily dismantled or moved.

The notion of “easily dismantled or moved” has been commented on by the European Commission in its explanatory notes and endorsed by administrative doctrine.

Thus, this characteristic must be assessed taking into account both physical criteria (“without providing effort”) and economic criteria (“without incurring significant costs”) set out by the Court of Justice of the European Union (CJEU). In this regard, the Court (CJEU, January 16, 2003, Case C-315/00, Rudolph Maierhofer, ECLI:EU:C:2003:23) considered that prefabricated buildings that could be dismantled for reuse constituted real property because they were not easily dismantled and movable, requiring eight people for ten days for disassembly.

Thus, regarding the first condition to be satisfied, the construction of a ground-mounted photovoltaic plant generally requires possible site access arrangements, preparation of the land on which the installation will be located, trenching for burying power cables, and the installation of module foundations. The ground-mounted photovoltaic installation consists of several elements: the photovoltaic system (panels with ground fixing system), connection cables, and technical rooms housing inverters, transformers, meters, and/or the delivery point.

Furthermore, depending on the geotechnical quality of the land, light structures or heavier foundations are put in place. The construction of a plant also requires the assembly of module supports, the placement of photovoltaic modules on the supports, the installation of electrical equipment (inverters and transformers, delivery point), the construction or installation of a technical room, and site security works. Finally, the construction of photovoltaic installations with a capacity exceeding 250 Kwc is subject to the issuance of a building permit.

Given these observations, it should be considered that such a ground-mounted photovoltaic park constitutes an industrial installation that must be qualified as a construction under b) of Article 13 ter of the VAT Implementing Regulation.

Furthermore, regarding the operation of the photovoltaic installation, manufacturers offer production guarantees over 25 years. At the end of the installation’s life, when the operator opts for the dismantling of the installations, the condition of being easily dismantled must be assessed in light of the indicators developed by the CJEU and included in the explanatory notes of the European Commission.

Thus, a large-scale park, with photovoltaic modules fixed by deep piles in the ground and whose installation and dismantling would require the involvement of many people and significant logistical resources, would be considered not easily dismantlable.

The photovoltaic park is therefore considered real property within the meaning of b) of Article 13 ter of the VAT Implementing Regulation. For works related to this real estate, the VAT self-assessment scheme provided for in Article 283, 2 nonies of the CGI applies.