VAT refund for the construction of a kindergarten

VAT refund for the construction of a kindergarten


Question:
Hello!

Is it possible for a company whose business is educational services to build a building (kindergarten) and be reimbursed VAT during construction? If so, is this construction VAT due at some future point in the company's operations?
As far as I am aware, the educational activity (the object of activity of the kindergarten) is exempt from VAT and the income that the kindergarten will realize will be exempt from VAT. If this is indeed the case, is it a prerequisite to be refused a refund of VAT during construction or after its completion?
Thanks in advance!

VAT return, construction of a kindergarten, educational services, accounting services, Varna, Ruse, Plovdiv, Burgas, Sofia
Answer:

Hello,
In principle, any company can carry out different types of activities - without restrictions. The only restrictions would be the need for permits/licenses to carry out certain activities.
If the company is registered for VAT and makes expenses that are related to the commercial activity, then the VAT included in the expenses incurred can be refunded.
Subsequently, this recovered VAT is not returned in any form. The idea is that this asset (building), which you will build and recover VAT on the costs associated with it, will subsequently bring you income that will be taxed with VAT
If, after carrying out the construction (repair) of the building, you use it to carry out your main activity (carrying out an educational activity), then you do not have the right to use a tax credit (VAT refund) for the VAT paid on the construction (repair) of the building according to Article 70 paragraph 1 of VAT: "The right to deduct a tax credit IS NOT available when the goods and services are used to make exempt supplies."
If, after construction of the building, you sell it or rent it out with VAT charged on the sales (renting out), then you have no obstacle to use a tax credit and recover VAT during construction.
We hope we have been helpful!
Greetings!




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