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VAT refund for the renovation of a residential building with commercial spaces.

February 1, 2011 | 20,00 EUR | answered by Oliver Burchardt

Hello,

the following situation:
my wife is the owner of a house and wants to optimize the tax structure of the renovation. The total cost of the renovation is approximately 180,000 euros.

As I will be using parts of the house for business purposes (about 30% of the living space), the idea was for my wife to apply for a second tax number in order to rent it out to me commercially.

The intention behind this was to reclaim the input tax from the tax office proportionally (30% of the total renovation costs of the house).

My question now is whether this model would be the optimal solution in our case or if there is a better solution (e.g. reclaiming the full input tax with partial private use - paying VAT for private use in the following years).

Thank you in advance for your help!

Oliver Burchardt

Dear inquirer,

Thank you for your inquiry, which I am happy to answer as part of an initial consultation.

The tax planning you are aiming for is, based on the information provided, the best solution for VAT purposes in your case.

Unfortunately, the idea of transferring the entire building into the company's assets and subjecting the private subsequent use to VAT is no longer feasible since 1.1.2011. This so-called "Seeling model" is no longer possible due to § 15 para. 1b UStG, as this provision establishes a new input tax exclusion case.

I am sorry that I cannot provide you with a more favorable answer.

Kind regards,

Oliver Burchardt
Tax advisor