VAT reduction during house construction

You can now view the draft bill online.

Assuming it is passed as is and there are no "additional application rules," I read it layman-like as follows:

1. The time of performance is decisive, meaning if the service is rendered between 01.7. and 31.12., then 16%. Partial services correspondingly according to the fulfillment of the partial service. Advance or interim payments must be corrected to 16% in the final invoice if final fulfillment is after 01.07. or before 31.12.

2. This does not result in an obligation (but of course it may) for the entrepreneur to adjust the price accordingly (i.e., pass it on to the customer).

3. For special contracts (notary, architect, etc.) where there are special fee calculations based on net prices (HOAI, for example), the applicable VAT must be added to the net price (i.e., reduction passed on).

4. For long-term contracts (concluded before 01.03.20), both parties are entitled to compensation in case of reduction or increase (here now a reduction). Unless special provisions are made in the contract, civil law applies.

For me, from a consumer perspective, there are two "problem cases." The contract is concluded between 01.03. and 30.06., then it is at the discretion of the entrepreneur, and one can hope that he passes it on. As a consumer, of course, I hope so. And there are some provisions in the contract regarding VAT which are usually meant for increases but might possibly also exclude passing on the reduction under civil law.

But please again. Only the draft and I am a layman. Maybe someone "more specialized" can take a look.

I think you have summarized that quite well.

What I personally cannot yet make sense of or bring to life is the topic of long-term contracts. Do construction contracts really count as part of that, or is it more about ongoing obligations/subscriptions etc. Since this corresponds quite precisely to §29 USTG and it has existed for a longer time, I assume that there are already some VAT commentaries or court rulings on this.

Can I do some research later

I will summarize the VAT commentary on Paragraph 29 UStG in Lippross/Seibel.

General:
The provision grants a civil law claim for compensation in all cases where the VAT burden changes. For disputes regarding the cause and amount, civil law is responsible (as we already know). However, this civil law claim only exists if the contract was concluded no later than four calendar months before the law came into effect.
The exclusion of a compensation claim can be expressly agreed upon (this would be the case with contracts containing the corresponding clause), but it can also be excluded by agreeing on a fixed price.

Now the interesting part for .
The following example applies:
A car dealer concludes a purchase contract with a private individual on 02.08.06 without a tax clause for a car at a gross price of 75,000. The car is delivered on 05.02.07. The transaction is subject to VAT at a rate of 19% because the delivery date (transfer of control) is after the key date of the tax increase (01.01.07). In principle, the seller must bear the additional burden himself because there was no tax clause in the contract. But according to Paragraph 29 Abs. 1 UStG, the entrepreneur can assert a reasonable compensation claim against the purchaser because the contract was concluded before 01.09.06 (i.e., more than four months before).

Just to round this all off:
According to Section 238 UStHA, the scenario applies in reverse in the case of a reduction in VAT. Then the service recipient has the claim for compensation.

What about contract work where the order has already been placed, but the final acceptance only takes place in the second half of the year, such as tiling, sanitary, or electrical work? Would the lower VAT rate apply retroactively here as well?

So, according to my understanding, the tax rate valid at the time of acceptance is due on the entire final invoice. Example:

- Electrician work total net amount 50,000 euros.
- Before 01.07, partial invoices amounting to 40,000 euros net have already been issued and duly paid plus VAT. So 40,000 + 40,000*0.19 = 47,600 euros gross have already been transferred.
- The acceptance takes place on 01.07.2020 and the final invoice arrives on 02.07.
- The final invoice then states:

Total net amount: 50,000 euros
VAT 16%: 8,000 euros
Already paid: 40,000 euros net plus 7,600 euros VAT
Remaining amount due: 10,400 euros

Savings thanks to the VAT reduction amount to 1,500 euros, since for construction services the acceptance is relevant for the VAT date of supply.

So this is really positive for us builders at the moment. As many trades as possible should be accepted in the 2nd half of the year.

Regarding passing on the benefit, I can only speak for our case: we build by individual contracts and so-called unit prices are agreed with the trades. These are net prices. That means we benefit 100% from the VAT reduction. That is also the point of it. We will probably treat ourselves to one or the other extra because of this. The contractor also benefits and that’s exactly how it should work with the VAT reduction. Cheers!

The exclusion of a compensation claim can be explicitly agreed upon (that would be the case with contracts containing the corresponding clause), but it can also be excluded by agreeing on a fixed price.

If the contract states: "Gross price of XXX,XXX€. Fixed price until 31.12.2020.", am I then out of luck? The construction contract was concluded in September 2019. The acceptance with final invoice will probably take place in the second half of 2020.