Construction works and VAT. When they are a service supply and when they are real estate.

An invoice for construction or installation work is not treated the same as an invoice for goods, and the distinction doesn't depend on what you sell but on what remains behind you. If the installed element cannot be removed without seriously damaging itself or the building, the work is considered work on real property.

Common confusion in technical trades

The electrician, the plumber, and the small contractor make the same mistake. They call what is, for VAT purposes, a service supply a sale with installation, and they build the invoice on that assumption. The confusion doesn't become apparent until the audit arrives or the buyer asks for something different from what you've provided.

This page compiles the definitions and the practical test that distinguish the two. It does not provide rules or replace the tax legislative source pages, which you can find linked below, section by section.

Read also: Construction accounting for the contractor and for technical trades., where you find the situations, revenue recognition by completion stage, the subcontractor, and the depreciation of the construction site equipment.

When construction and maintenance are a service procurement

Pursuant to the provisions of Law No. 92/2014 of July 24, 2014 “On Value Added Tax in the Republic of Albania,” as amended, construction operations, including the performance of the construction and maintenance process, are supplies of services. The supply of these services is taxable for VAT purposes.

Construction defined as any operation that results in the complete or partial completion of a new or substantially altered building.

Maintenance Defined as any operation carried out on land or in a building to prevent deterioration or damage and to keep the land and buildings in good appearance and proper working order, including cleaning.

For certain works related to buildings and real estate, even if the primary purpose is not the construction of a structure, they are also considered service supplies—such as specific cleanings solely for maintenance and the opening of small channels in harbors, rivers, and the like.

Which works are part of the construction process?

Works related to the construction process, without being limited to them, are:

i) Construction of buildings and other construction works;
ii) works for the equipment of buildings that have as an effect the definitive installation of apparatus or materials;
iii) restoration and repair works on buildings, as well as installations of a real estate nature.

Construction works include:

• Construction works carried out by various professional teams involved in building construction, such as excavations, foundation creation, site cleanup and leveling, boreholes and preliminary excavations for real estate development, as well as site team and façade works.
• Public works such as roads, railways, bridges, and all works of art, runways, and stadiums.
• Sheet metal work on building exteriors, as well as metal structures such as gathering or circulation systems.
• Land development works that involve modifying the existing terrain, such as quarry excavations, slope leveling, excavation and filling of pits, and soil clearing.

The test that distinguishes real property from personal property.

This is where mistakes are most often made, and there is only one test. Installation works that involve placing elements which lose their character as movable goods by being incorporated into an immovable asset must, for VAT purposes, be considered part of the immovable property.

They are considered such when the removal of the installed material cannot be carried out without causing severe damage to the material or the building that supports it.

Restoration and repair works

Restoration or repair works aimed at renovating a building or an installation with real estate character are considered works on real estate. They are considered as such when the operations carried out involve placing materials or elements that are integrated into a real estate asset, or when these operations are intended to replace the used elements of an immovable installation, or the addition of new elements incorporated into this installation or into the building that houses them. Among these operations, we can cite:

i) the restoration of façades, which includes work to clean the façades of old buildings or that can be integrated into a full new-construction cycle;
ii) repair of roofs, chimneys, flooring, doors, and windows.

Where do you go from here, depending on your question?

Classification is not a theoretical exercise. It determines whether what you issue is an invoice for the supply of services, and from that depends how you document the work, how you link it to the contract and the situation, and how the buyer treats what they receive.

Rates, exemptions, and deadlines are not provided here intentionally, because they change and can be found on the official tax law source pages, which we keep updated.

• TVSH, the main source page, with the registration threshold, declaration, and books.
• Reduced rates, when your activity affects accommodation or other listed cases.
• Exemptions and Deductible VAT, for what cannot be downloaded.
• Electronic invoice, regarding how it is released and what it should contain.
• Calendar and deadlines, for the filing and payment dates.
• Amendments to Directive No. 6, dated January 30, 2015, on VAT, regarding the service recipient's status.
• Construction accounting, for situations, the subcontractor, on-site safety, and depreciation.

Frequently asked questions

Does cleaning count as maintenance?

Yes. Maintenance is defined as any operation carried out on land or in a building to prevent deterioration or damage and to keep it in proper working order, and the definition explicitly includes cleaning. Furthermore, certain cleanings carried out solely for maintenance and the opening of small channels in ports and rivers are also considered service supplies.

Are public works considered construction projects?

Yes. Construction works include roads, railways, bridges, and all types of engineering structures, runways, and stadiums.

How do I know if my installation is treated as real estate?

The practical question is a single one: can the installed element be removed without causing serious damage to the material itself or to the building that supports it? If removal causes serious damage, the installation is treated as part of the real property. If the object retains its movable character at the time it is placed, it does not constitute work on real property, regardless of the nature of the building.

Is selling an air conditioner and installing it the same thing?

Not necessarily, and this is precisely where the test applies. An appliance that is installed and retains its playable character does not fall under real estate works. An installation that is integrated into the building and cannot be removed without serious damage does. Therefore, the description on the invoice and in the contract must reflect what is actually carried out.

Where can I find the accounting rules for a construction company?

To The Construction Accounting Guide, which covers the legal form, professional license, situations and revenue recognition, the subcontractor, site wages, safety, and the year's deadlines.

Legal basis and limitations

Two boundaries that we mark openly

First, this page does not provide any VAT rate or article number. We have not yet read the consolidated text of Law No. 92/2014 from an official copy, so we do not speculate on it. The rates are maintained on the source pages linked above, and the page will be updated with the articles on the day the text is read.

Secondly, the above definitions are at the level of detail typically provided by implementing guidance, not by the law itself. Therefore, we leave the reference to the law as it is and do not replace it with another without verifying the source. The link to the guidance is provided above for your reference.

The acts on which this text is based

• Law No. 92/2014, dated July 24, 2014, “On Value Added Tax in the Republic of Albania,” as amended, for the treatment of construction and maintenance operations as service supplies.
• Instruction No. 6, dated January 30, 2015, “On Value Added Tax,” as amended, as the implementing act of the above-mentioned law.