The supply of a building may be standard-rated, zero-rated or exempt from VAT, depending on the nature of the building and the permitted use thereof at the date of supply.
Since VAT is a transaction-based tax, the VAT treatment shall be determined independently at each date of supply.
This Public Clarification clarifies the VAT treatment of the sale of a building and the subsequent use thereof by the purchaser.
The sale of a building constitutes the supply of a single indivisible good at the date of supply. If the purchaser subsequently changes the permitted use of the building, it does not impact on the VAT treatment of the preceding sale.
Consequently, where a building was sold as a serviced/hotel apartment and the purchaser subsequently change the permitted use of the building to residential use only, the preceding sale will remain subject to 5% VAT whereas the purchaser should not account for VAT on the subsequent exempt supply.
If a building was sold as a residential building but the permitted use is subsequently changed to use as a serviced/hotel apartment, the VAT...