Construction services in the EU 2026
art. 28e and place of supply — reverse charge, foreign registration
Polish construction companies increasingly provide services in Germany, Belgium, the Netherlands and Scandinavia. The place-of-supply rule for services related to real estate (art. 28e of the VAT Act) differs from the general art. 28b rule — meaning taxation almost always occurs in the country where the property is located. We explain the rules, the reverse-charge mechanism, and when registration in another EU country is required.
General rule (art. 28b) vs exception (art. 28e)
The place of supply of a service determines in which country the VAT obligation arises. The VAT Act provides two main mechanisms:
Art. 28b — general rule (B2B): the place of supply of a service to a taxable person is the buyer's country. Reverse-charge mechanism: the buyer accounts for VAT locally, the supplier issues an invoice without VAT with the annotation "reverse charge". Transaction reported in the VAT-EU summary (part E).
Art. 28e — exception for real estate: the place of supply of services related to real estate is the country where the property is located — regardless of the buyer's status (B2B or B2C) and regardless of their seat.
Practical difference:
- IT service from Poland to a German company — art. 28b, buyer's country = Germany, reverse charge at the German company, in the Polish VAT-EU summary as a service,
- Construction service from Poland on a building site in Berlin — art. 28e, property country = Germany, taxation in Germany, NOT included in VAT-EU summary.
What 'services related to real estate' means
The definition in art. 28e of the VAT Act covers services:
- Provided by appraisers, real-estate brokers,
- Accommodation in hotels and similar establishments,
- Use and exploitation of real estate,
- Preparation and coordination of construction work — services of architects and construction supervision.
EU Implementing Regulation 282/2011 (art. 31a) clarifies that a service is "related to real estate" if it has a sufficiently direct connection to a specific property. This means:
- It derives from the real estate and the property is a central component of the service,
- Or it concerns a change in the legal or physical condition of the property.
Classic real-estate-related services:
- Building plans for a specific plot (architect),
- On-site construction supervision, building security,
- Erecting and demolishing buildings and building parts,
- Constructing pipelines, sewage, gas, water networks,
- Ground works, agricultural (ploughing, sowing, irrigation, fertilization),
- Installation of permanently mounted systems (air conditioning, alarms, solar panels),
- Renovations, modernization, finishing.
B2B status — the reverse-charge mechanism
The most common scenario: a Polish construction firm provides services for a VAT taxpayer (company) in another EU country, on real estate in the same country.
Example 1. Polish firm "BudPol" performs finishing works for a German company "BauBerlin GmbH" on an office building in Berlin. Value: 50,000 EUR.
Settlement:
- Place of supply: Germany (property country, art. 28e),
- Mechanism: reverse charge — the German company accounts for VAT locally,
- The Polish firm issues an invoice without amount and VAT rate, with annotation "Reverse charge — art. 196 of Directive 2006/112/EC",
- In Polish VAT records: reported as services provided outside the country territory (column in JPK_V7M for services outside EU/PL),
- NOT reported in VAT-EU summary (see below).
The Polish firm does not remit Polish VAT, but should register for VAT-EU (art. 28b for other services to the EU) — though for art. 28e this is not strictly required.
What if the buyer is from a country other than the property
Less obvious scenario: the buyer is based in one EU country, while the property is in a third country.
Example 2. Polish firm "BudPol" provides services to a German company, but works are performed on a property in the Czech Republic.
Place of supply: the Czech Republic (property country). Two scenarios are possible:
Scenario A — Polish firm registers in the Czech Republic:
- Polish firm obtains Czech VAT registration (DIČ — Daňové identifikační číslo),
- Issues a Czech VAT invoice with the Czech rate (21%),
- Remits Czech VAT to the Czech tax authority,
- In Polish VAT records: nothing — the transaction is not subject to Polish taxation.
Scenario B — German buyer registers in the Czech Republic:
- The German company "BauBerlin" registers for VAT in the Czech Republic,
- The Polish firm issues an invoice without VAT with reverse charge to the German company with its Czech VAT number,
- The German company accounts for Czech VAT with the Czech authorities.
The choice between scenarios depends on the parties' agreement. Foreign VAT registration is a significant administrative cost (up to 1,000-3,000 EUR per year + sworn translator) — often Scenario B is more economical.
Services for individuals (B2C) — registration duty
When the buyer is an individual not running a business, the reverse-charge mechanism does not apply (a consumer cannot account for VAT).
Then the Polish firm must:
- Register for VAT in the country where the property is located,
- Issue an invoice with that country's local VAT rate (e.g. 19% DE, 21% CZ, 25% SE),
- Remit local VAT to the local tax authority,
- File local VAT declarations (monthly or quarterly).
Example 3. Polish renovation firm works for an individual in Vilnius (apartment renovation). Place of supply: Lithuania. The Polish firm must register for Lithuanian VAT (PVM mokėtojas) and remit 21% Lithuanian VAT. The service is not subject to Polish VAT and is not reported in Polish records.
Why art. 28e services are NOT reported in VAT-EU summary
A common mistake: construction firms report art. 28e services in the VAT-EU summary (part E). This is wrong.
Under art. 100 sec. 1 point 4 of the VAT Act, the obligation to report in VAT-EU summary covers only services for which the place of supply is determined under art. 28b (general rule).
Services under art. 28e (real-estate-related) and other exceptions (art. 28c — passenger transport, 28d — short-term transport hire, 28e, 28f, 28g, 28i, 28j, 28n) are NOT reported in VAT-EU summary.
Consequence of the error: discrepancy in the VIES system (buyer's country won't confirm WNT — because no WNT arose on their side), requests for clarification from the Polish tax office, risk of cross-audit.
What is reported in Polish VAT records:
- Service value as "services provided outside the country territory" — in JPK_V7M in the appropriate column,
- Invoice issued with "NP" (not subject) rate or without VAT (depending on accounting software),
- No entry in VAT-EU summary.
Posting of workers and the A1 form
Providing construction services abroad usually involves sending Polish workers to the building site. This triggers obligations beyond VAT:
1. A1 form (ZUS). Certificate of being subject to the Polish social-security system while working in another EU country. A worker with A1 pays ZUS in Poland, is not subject to the local social-security system of the host country. A1 is issued by ZUS after filing ZUS-Z (max 24 months at a time).
2. Posted-workers directive (96/71/EC, amended 2018/957). A posted worker has the right to the minimum wage of the country where they work (e.g. German 12.82 EUR/h Mindestlohn). The Polish employer must register the posting in the local register (e.g. Zoll DE, ARES CZ, BIA NL).
3. Income tax. A worker posted for less than 183 days a year pays PIT in Poland. Above 183 days — usually in the host country (depending on the double-taxation treaty).
4. Permanent establishment (PE). If construction lasts more than 12 months (or 6 months in some OECD treaties), the Polish firm has created a tax "establishment" (PE) in that country. This means obligation to register CIT locally and tax the profit attributable to the establishment in that country.
Frequently asked questions
Can I apply reverse charge for a construction service to a German individual?
No. The reverse-charge mechanism applies only B2B — the buyer must be a VAT taxpayer. An individual is not a taxpayer, so the Polish firm must register for German VAT (USt) and remit German VAT on the service. No exceptions.
Is architectural design service for a German company art. 28b or 28e?
It depends on the subject. Design for a specific plot/building is art. 28e (real-estate-related — property country). General architectural advice without attachment to a specific property is art. 28b (buyer's country). The line is thin — when in doubt, request an individual ruling from the Polish National Tax Information.
Do I have to register for Polish VAT-EU if I only provide art. 28e services?
Formally — no, if these are the only EU transactions (art. 28e does not require VAT-EU registration). In practice — registration is advisable, because: a) if you ever perform an art. 28b service for an EU taxpayer, you will need VAT-EU; b) some accounting software requires VAT-EU to handle 'NP' invoices; c) for any potential WDT of construction materials to the EU — strictly required.
Is renting construction machinery to an EU firm also art. 28e?
Only if the machinery is permanently installed on a specific property (e.g. a tower crane mounted on a building site). Short-term rental of mobile machinery (up to 30 days) is governed by art. 28j — place where the machine is actually made available. Long-term rental (over 30 days) is art. 28b — buyer's country.
What if a construction project in Germany lasts 8 months?
Less than 12 months — usually does not create a permanent establishment (PE) for CIT purposes. But: a) VAT on the service settled in Germany (reverse charge B2B), b) workers posted on A1 up to 24 months, c) workers' PIT still in Poland (usually below 183 days per year per worker). We recommend consulting a tax advisor before starting any project longer than 6 months.
Need help with settling construction services abroad?
Polish construction firms providing services in the EU typically face several simultaneous challenges: VAT settlement in the property's country, corporate income tax on a permanent establishment (PE), posting of workers with A1, control formalities. At Księgowość 365 we serve construction companies operating in Germany, the Netherlands and Sweden — from local VAT registration to full reporting.
For one-off projects we also offer a feasibility study — should you register locally, or have the buyer register and apply reverse charge.
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Marek specializes in corporate finance, international transactions, due diligence and verification of foreign contractors.