Rule 5 – Place of provision of services relating to immovable property :

The place of provision of services provided directly in relation to an immovable property including:-

• services provided in this regard by experts and estate agents
• provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called
• grant of rights to use immovable property
• services for carrying out or co-ordination of construction work, including architects or interior decorators

shall be the place where the immovable property is located or intended to be located.

Analysis of the rule

In case of a service that is “directly in relation to immovable property‟, the place of provision is where the immovable property (land or building) is located, irrespective of where the provider or receiver is located.

Immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth [Section 3(26) of the General Clauses Act]. Thus, properties such as buildings and fixed structures on land would be covered by the definition of immovable property.

1. Applicability of this rule: This rule applies if the service is directly in relation to immovable property located in taxable territory. The immovable property must be clearly identifiable to be the one from where, or in respect of which, a service is being provided. In other words, there needs to be a very close link or association between the service and the immovable property.

Following criteria will be used to determine if a service is in respect of immovable property located in the taxable territory:-

(i) The service consists of lease, or a right of use, occupation, enjoyment or exploitation of an immovable property;

(ii) The service is physically performed or agreed to be performed on an immovable property (e.g. maintenance) or property to come into existence (e.g. construction);

(iii) The direct object of the service is the immovable property in the sense that the service enhances the value of the property, affects the nature of the property, relates to preparing the property for development or redevelopment or the environment within the limits of the property (e.g. engineering, architectural services, surveying and subdividing, management services, security services etc);

(iv) The purpose of the service is:

(a) the transfer or conveyance of the property or the proposed transfer or conveyance of the property (e.g., real estate services in relation to the actual or proposed acquisition, lease or rental of property, legal services rendered to the owner or beneficiary or potential owner or beneficiary of property as a result of a will or testament);

(b) the determination of the title to the property.

Examples of land related services

•  Renting of immovable property
•  The surveying (such as seismic, geological or geomagnetic) of land or seabed
•  Legal services such as dealing with applications for planning permission
•  The supply of hotel accommodation or warehouse space

2. Non-applicability of this rule: This rule does not apply if a provision of service has only an indirect connection with the immovable property, or if the service is only an incidental component of a more comprehensive supply of services.

Examples of services which are not land related

•  Advice or information relating to land prices or property markets because they do not relate to specific sites.
•  Services of an agent who arranges finance for the purchase of a property .
•  Repair and maintenance of machinery which is not permanently installed. This is a service related to goods.