Tax reduction of 16 percent also in broker and developer regulations

Good morning everyone,

I have a question about the topic of tax reduction, as I hear different things everywhere.
The fact is that there is a tax reduction from 01.07.2020 - 31.12.2020. We bought a terraced house (July 2019) at a fixed price of €349,000 according to the payment plan under the broker and developer regulation. I must also say right away that it is noted in the notary contract that if VAT increases, this will be reflected in the installment payments and invoices. (Statement from the developer, it is historically grown and would have no significance and we had agreed on a fixed price)

The house was then completed at the end of August 2020 and accepted by us. Partial payments of about €48,000 were paid (VAT-free on the invoice) and the invoice for special requests in the amount of €18,000 as well.

Now the question is, how do you proceed here? The revenue is VAT-free but at the same time the developer states that in case of tax increases this will be reflected in the installment payments. Does anyone know how to proceed in such a case or has anyone had such a case? Can I simply deduct 3% from the above amount?

I still have a final payment of €12,000 open when the outdoor area is finished, but that will not be until next year.

I would appreciate feedback.

Best regards, your Baumeister Infuso

The purchase contract from the property developer is subject to real estate transfer tax and is therefore exempt from VAT. And no, you cannot simply deduct the 3%.

My personal (layman) opinion:

There are 2 scenarios where the case with the increasing VAT could apply:
Scenario 1
The clause was probably inserted back then in case the VAT rate increases.
Since the property developer has no input tax deduction, an increase in VAT leads to higher purchase prices.
However, only the prices for purchased services increase and not for self-performed services. So if he has a lot of his own personnel, his costs do not rise as much as when he lets everything be done by subcontractors.
Therefore, in my opinion, the developer should not simply pass on the increased VAT as a percentage but would probably have to prove quite precisely to what extent the VAT has increased – i.e. that he has incurred additional expenses.
Conversely, you would now have to specifically prove which savings he has from the reduced VAT. However, due to lack of access to the developer’s accounting, you are hardly able to do this.
In addition, not every dealer/subcontractor is likely to have corrected their prices downwards by 3%, and the majority of his purchased services from the first half of the year are probably still calculated at 19%.
Simply deducting 3% is definitely not correct and would considerably over-advantage you.

Scenario 2
Alternatively, it could also be that the tax exemption no longer applies. Even then, the developer would have the option to adjust his prices.

Hausanschlusskasten es einfach ab.

Gross fixed price is gross fixed price. Adjustment clauses can be formulated so that the price can go up, but not down. Read carefully, it is stated in the contract.

Thank you for your feedback. Hmm, then I guess I have to come to terms with it. The developer had awarded all trades to subcontractors, which means that he benefits from it. What makes me suspicious is the section about the increase; legally, he is allowed to include that, but it also automatically means, conversely, that it applies to a reduction as well. But I might be wrong, since I am not a lawyer. Best regards and a happy New Year, your Infuso

The developer had awarded all trades to subcontractors, which means he benefits from that.

However, the shell constructor, window installer, and roofer were probably still billed with 19%. The land, the contractor's wages, the profit, etc. are all without input tax deduction.
Therefore, the developer likely benefited only very little from the VAT reduction on your construction. The 1.5-2.5k€ savings were probably easily offset by the general price increase in construction.

What makes me suspicious is the section about the increase; legally he is allowed to write that, but it also automatically implies, conversely, that it applies to a reduction as well. But I could be wrong, as I am not a lawyer.

The converse is neither logically nor legally relevant. Turn it around - someone tells you that you might pay 5% less if they can buy cheaper. Then they buy more expensively and demand 5% more from you based on "converse logic." That might meet with little acceptance.