Due to the economic consequences of the Corona crisis, the German government has stipulated a reduction in VAT from 19 to 16 percent in the Second Corona Tax Relief Act Section 28 Paragraph 1 and Paragraph 2 UStG. This reduction relates to the period from July 1 to December 31, 2020, after which the VAT rate of 19 percent will apply again from January 1, 2021. This bill will also benefit private builders, as the invoices of their tradesmen and construction companies may only charge 16 percent VAT on the services they provide under certain conditions.
It should be noted that the reduced VAT can only be applied if wording such as "plus 19 % VAT" or "plus the applicable VAT" is specified in the respective contracts. If only a fixed price was agreed upon the purchase and stated in the contract, the companies do not have to pass on the VAT reduction. The purchase of an existing property from a private individual is not subject to VAT. However, if the property is a refurbished old building purchased from a developer, the buyer will receive a proper invoice with a VAT rate of 16 percent.
However, the Association of Private Building Owners (VPB) advises against rashly completing purchases and construction measures in order to benefit from the tax reduction. This is because existing properties should be checked for defects by an expert before purchase. In the case of new-build properties, there are several ways in which private developers can benefit from the tax cut and save costs. For example, one option may be to renegotiate contracts with construction companies or tradesmen and bring certain work forward to the second half of 2020. Dividing completed work into several partial acceptances at different deadlines is also an alternative. However, the VPD also points out the disadvantages of partial acceptances, for example. Further information on the VAT reduction can be found on the VPB website.
Source: VPB
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