Renovation and VAT: when 21% and when 9%?

When it comes to renovation and VAT, the main rule is simple: you pay 21% VAT on both labour and materials. There is one important exception. For insulating a home that is more than two years old, the reduced rate of 9% usually applies to the labour. Materials stay at 21%. Because the rules differ per type of work and can change, it is wise to check the current conditions with the Dutch Tax Administration (Belastingdienst) or your adviser if you are in any doubt.

Renovation and VAT: how much do you pay?

The standard rate of 21% applies to most renovations. That covers an extension, a roof extension, a new kitchen or bathroom, window frames and most carpentry. The contractor charges VAT on the full amount.

As a private individual you cannot reclaim that VAT. So include the amount including VAT in your budget. How a renovation is roughly made up is explained in what does a renovation cost.

When does the low VAT rate apply to renovation?

The reduced rate of 9% applies to the labour for insulating a home that was first taken into use more than two years ago. Think of insulating a roof, attic, facade or floor. You pay 21% on the insulation materials themselves.

For a few other jobs on existing homes, such as painting and plastering, the low rate on labour may also apply. The conditions are precisely defined, so check before you assume it. Read more about insulation in attic insulation.

• The home is more than two years old
• Only labour at 9%, materials at 21%
• Applies to insulation work on roof, facade and floor
• Labour and materials listed separately on the invoice

How does VAT appear on the contractor's invoice?

If part of the work falls under the low rate, the contractor must list labour and materials separately, with the correct rate for each part. With a mixed job, for example a renovation in which the existing roof is also insulated, there are two rates on the same invoice.

Ask how the VAT is split as early as the quote stage. That way you compare quotes fairly. Tips for that are in choosing a contractor and comparing quotes.

Does the low rate also apply to an extension?

As a rule, no. An extension, roof extension or newly built home falls under the standard rate of 21%, including the insulation of that new part. The low rate is intended for existing homes. If you also insulate an existing part of the home during the same renovation, that part may fall under 9%.

If you are unsure about a particular item, check with the Belastingdienst or your accountant. In our quotes we clearly state which part is labour and which part is materials.

Can you save on VAT when renovating?

Not through complicated constructions, but through smart planning. Combine insulation work with the renovation and have it itemised separately, so the low rate on labour is applied correctly. Also look at subsidies for insulation, such as the ISDE, and at how you finance the work.

Subsidies have their own conditions and minimum insulation values; check them on the RVO website. Read more in sustainable renovation and insulation and about financing in financing an extension.

• Have insulation work itemised separately
• Check subsidy conditions in advance
• Always include VAT in your budget
• Compare quotes including VAT

Frequently asked questions