VAT on services

tva sur les prestations de service

Tax Treatment of VAT on services

Article 89 of the General Tax Code lists providing services amongst taxable transactions.

Provision of services is a very broad concept. Indeed, it includes all payable transactions that do not entail a delivery of goods.

Moreover, VAT on services also applies to transactions and activities that fall within the scope of industrial leasing or contracting. Indeed, these transactions generate various remunerations (royalties, interests…). Provision of services also includes rental “things”, which should be taken in its broadest sense: rental of equipment, machines, vehicles, personnel, booths, party or congress rooms… 

The Circular 717 – Volume 2 provides further insight on these elements. This article will review the basic concepts of VAT on the provision of services.

Which transactions are subject to VAT on services?

Installation or laying transactions.

An installation or laying operation consists in placing movable objects in a furniture set. In this case, both the supply of the said goods and the installation service are subject to VAT. The installation transaction is subject to VAT on services.

The same Circular 717 list some examples of such transactions:

  • First, the installation of objects or devices not sealed (fixed to the ground) and likely to be sold without installation;
  • Second, the installation of furniture whose sealing is merely to ensure its stabilization
  • Thirdly, the installation of machines and devices in factories

Installation transactions are treated as services. This distinction is important. Indeed, the provision of services is subject to a VAT rate of 20% while the goods to be installed may be exempted or have a reduced rate.


Repairs consists in restoring an object to its original state without modifying its characteristics. Therefore, it is different from transformation and renovation operations.

In fact:

  • transformation results in a modification of the object’s initial characteristics
  • renovation consists in restoring a property or object to its initial state. As such, its value will also include the value of the elements used for renovation.

Repairing has the characteristics of a service since the goods keeps their quality of second-hand objects. On the other hand, renovation is treated more like the sale of a brand-new object.

Contract work

Contract works consist in:

  • First, adapting an object to the needs for which it is intended
  • Second, transforming a material, product or object belonging to a third party.

The contractor is considered as a service provider and is taxed as such for the commission received.

On the other hand, a manufacturer who buys raw materials and transforms them, is considered as a seller of the said products.

VAT on services – Special case of hotel and restaurant services

Accommodation and sale of eat-on premises food are services. However, they benefit from a reduced VAT rate of 10%.

It is therefore important to define these two concepts in order to determine accurately the applicable VAT rate.

Accommodation is the provision of lodging. This service’s providers are :

  • First, hotels
  • Second, tourist residences
  • Third, inns and guest houses
  • And in general, boarding houses, furnished rooms, motels, vacation villages…

Catering (or sale of foods or beverages to be consumed on the premises) corresponds to the consumption that takes place in:

  • First, restaurants
  • Second, bakeries designed for on-site consumption,
  • Third, drinking establishments
  • Fourth, restaurant cars
  • And in general, all buffets, stands, fairs, exhibitions…

In the absence of a particular arrangement (tables, chairs…) allowing the customer to consume on the spot, the sale operation is treated as a simple sale of food products (retail sale).

Other transactions subject to VAT on services

Rental of building

These are rentals of furnished or equipped premises, including the intangible elements of the business.

Banking and credit transactions

Banking, credit and other related transactions carried out by credit institutions are subject to VAT at the rate of 10%.

Other transactions

Services also include:

  • transportation,
  • storage services,
  • brokerage,
  • Concessions of patents, rights or trademarks


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