If the cost of goods used in carrying out work exceeds two-thirds of the total price, the VAT rate which applies to the goods then applies to the entire transaction.
The rule is calculated on a VAT exclusive basis.
For example, where the cost of materials used in the repair of a dish washer is €240 exclusive of VAT and the total charge for the repair work is €300 VAT at 23% applies rather than 13.5% which usually applies to this service.
If the cost of the goods used in carrying out the work does not exceed two-thirds of the total price, the rate which applies to the service then applies to the entire transaction.
For example, where the cost of materials used in the repair of a dish washer is €180 exclusive of VAT and the total charge for the repair work is €300 VAT at 13.5% applies.
The following services are not subject to the two-thirds rule:
- Repair and maintenance of motor vehicles and agricultural machinery.
- Construction services where principal contractors account for VAT on the receipt of construction services from sub-contractors
- Construction services between two connected parties.