Reducing the Municipal Property Tax or lowering the Value Added Tax (VAT) rate are just some of the tax benefits you can get on small businesses.

VAT – Value Added Tax

In the case of housing, the improvement, remodelling or conservation works benefit from the reduced rate of 6% (six percent) of VAT.

However, the above situation is only applicable if the value of the materials does not exceed twenty percent (20%) of the overall value of the civil work.

Example:

That is, if the manpower cost eighty thousand euros (€ 80,000) and materials twenty thousand euros (€ 20,000), making a total contract one hundred thousand euros (€ 100,000) the contractor can put everything on the same invoice, and the customer only pay 6% VAT.

A – All in one invoice:

Total of work in which the raw material is up to twenty percent (20%) of the total value of the civil work one hundred thousand euros (€ 100,000) + six percent (6 %) VAT = six thousand euros (€ 6.000)

B – Different invoices:

Manpower – eighty thousand euros (€ 80.000) + six percent (6 %) VAT = four thousand and eight hundred euros (€ 4.800).

Raw material – twenty thousand euros (€ 20.000) + twenty three percent (23%) VAT = four thousand six hundred euros (€ 4.600).

Total VAT: nine thousand four hundred euros (€ 9.400).

IMT – Municipal Property Tax

However, if the materials cost fifty thousand euros (€ 50.000), total work one hundred thousand euros (€ 100.000), it is best to individualize the values: manpower six percent (6%) and raw material twenty three percent (23%).

If all-inclusive, the tax rate applied is twenty-three percent (23%), and is eventually penalized.

About the Municipal Property Tax, it should be noted that classified buildings are exempt from Municipal Property Tax payment, namely in the public or municipal interest (palaces and mansions, for example), and are on an updated list in each municipality.

Urban buildings undergoing urban rehabilitation (works aimed at improving the property but maintaining the essence of the building, such as the façade, for example) are also free of Municipal Property Tax for three years from the year of issuance of the city council license.

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