Supply and Installation Agreements: Getting the correct VAT treatment

février 19, 2026 Mise à jour sur la TVA dans l'UE

Supply and installation agreements are common across many sectors, such as manufacturing and construction. However, ensuring the correct VAT treatment is vital and often not straightforward.

Supply and installation agreements typically involve two elements:

  • the supply of goods to be installed, and
  • the supply of installation services.

For VAT purposes, supplies of goods and supplies of services are usually subject to very different VAT treatment rules. However, in a situation where both of these elements are bound together under one single supply and installation agreement, determining the applicable VAT treatment is often problematic.

VAT Treatment of Supply and Installation Agreements

 Under EU VAT rules, where goods are supplied with installation, the place of supply (i.e. the country in which VAT is due) is generally the Member State where the installation takes place. In principle, this means that VAT is usually charged in the country where the goods are installed.

In practice, however, it is often not quite this straightforward. The VAT treatment of supply and installation agreements can vary significantly between Member States. For example, some difficulties commonly arise where:

  • the installation element is treated as ancillary to the supply of goods, often affecting the VAT treatment of the supply.
  • the incorrect application of a reverse charge mechanism, which can lead to under-declared VAT in situations where local VAT rules instead require the supplier to charge VAT in the country where installation occurs.
  • the supply and installation arrangement triggers an unforeseen VAT registration requirement, resulting in late VAT registration, late filings, payments of any VAT due and penalties and/or interest.
  • there is a failure to foresee the VAT implications of the supply and installation agreement in advance to ensure compliance and the VAT is correctly accounted for.

Correctly reflecting supply and installation rules in ERP systems adds a further layer of difficulty and risk. Standard VAT determination logic is rarely designed to deal with the complexities of supply and installation agreements across the EU. This increases the risk of VAT compliance issues as the business may need to rely on manual adjustments or incorrect tax codes which heightens the likelihood of errors in VAT determination.

How to Address These Challenges

 Implementing an automated VAT determination solution within your ERP system can help ensure consistent and accurate VAT treatment and reporting. A tailored solution ensures that the VAT treatment of complex supply and installation flows is applied consistently, accurately and in line with Member State requirements. This reduces reliance on manual adjustments, supports correct tax code selection, and helps prevent errors in VAT reporting.

Meridian has extensive experience in supporting businesses in implementing automated VAT determination solutions within their SAP systems, helping them manage the VAT treatment of complex supply and installation flows consistently and in line with local requirements.

If you would like any advice in regard to supply and installation agreements or would like to find out more about our automated VAT determination solution, please feel free to contact us!

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