VAT in quotes: how to calculate and present it

VAT rates for services

VAT (Value Added Tax) rates vary by country, but the principles for service professionals are similar everywhere.

Standard rate applies to most services: new installations, painting recent properties, work on commercial spaces.

Reduced rates may apply to renovation and repair work on residential properties, particularly older ones. The specific conditions vary by jurisdiction, but commonly require: • The work must be repair, renovation, or rehabilitation (not new construction) • The property must be residential • The property may need to be above a certain age

Example: If a client asks you to renovate the electrical installation in a 10-year-old apartment where they live, a reduced rate may apply. If it is a shop or a new apartment, the standard rate applies.

Always check your local tax authority's guidelines for the exact rates and conditions that apply in your area.

When the reduced rate applies

Reduced VAT rates do not apply to everything. Typical conditions that must be met simultaneously:

1. Type of work: Repair, maintenance, renovation, or rehabilitation. Does not apply to new construction.
2. Type of property: Residential. Does not apply to commercial spaces, offices, or warehouses.
3. Who contracts: The owner or tenant who uses the property for housing.

Jobs that typically qualify: • Plumbing renovation in an older house • Consumer unit replacement in a residential apartment • Interior painting of a home above the age threshold • Roof repair on a residential property

Jobs that typically do NOT qualify: • New house construction • Extension of an existing property • Office renovation • Work on communal areas

When in doubt, ask your accountant. Applying the wrong rate can result in fines.

How to present VAT in the quote

The way you present VAT affects the client's perception. Do it clearly:

The quote should show: • Value of work/materials (excluding VAT) • VAT rate applied • VAT amount • Total including VAT

Example: Materials: €450.00 Labour: €300.00 Subtotal: €750.00 VAT (at applicable rate): €45.00 Total: €795.00

Important tip: If the quote has items at different rates, present them separately. Be clear about which rate applies to which items.

With Prummo, you can configure the VAT rate in your quotes and the calculation is done automatically. The client sees everything itemised on the quote page.

Common mistakes to avoid

Mistake 1: Showing VAT-inclusive prices without breaking them down. The client does not know how much is VAT and how much is the actual work. Additionally, itemising VAT is often a legal requirement on commercial documents.

Mistake 2: Applying the wrong rate. Applying a reduced rate to work that does not qualify can result in fines and back-payment of the VAT shortfall.

Mistake 3: Not applying the reduced rate when it qualifies. The reverse is also bad, for you and the client. If the work qualifies for a reduced rate and you charge the standard rate, the client pays more than they should.

Mistake 4: Forgetting your exemption status. If you are registered under a small business VAT exemption scheme, you do not charge VAT. But you also cannot reclaim VAT on materials. The quote should mention your exemption status.

Mistake 5: Not updating when you change tax regime. When you cross the threshold for VAT exemption, you start charging VAT. All quotes from that point must include it.