Input: Vorsteuerabzug bei Bau eines Ferienhauses
Translation: Input tax deduction when building a vacation home
December 11, 2011 | 45,00 EUR | answered by Michael Herrmann
We are buying a piece of land and building a house on it to then rent it out as a holiday home. How can I claim the VAT on the installments we have to pay to the contractor in advance with the tax office as part of the contract, so that I receive the VAT back before I have to pay the respective installment to the contractor? Are there any construction costs (besides the land acquisition costs) that I cannot claim with the tax office?
Dear inquirer,
First of all, thank you very much for your inquiry, which I am happy to answer based on the information provided and in the context of your initial consultation. The response is based on the facts presented. Missing or incorrect information regarding the actual circumstances can influence the legal outcome.
1) Registering a business is not a prerequisite for sales tax. The economic circumstances are essentially relevant. The necessity of registering a business is regulated in the Commercial Code. However, in order to initiate the sales tax process, the business registration must also be submitted to the tax office. This is necessary because the tax office first checks for the existence of business or sales tax liable income.
2) Input tax deduction is regulated in § 15 para. 1 no. 1 UStG. Input tax deduction is generally possible if a proper invoice or contract is provided. The invoice does not necessarily have to be paid yet, but the service must have been provided.
Therefore, input tax deduction is only possible when the service designated for each installment has been provided. This does not occur before the due date. Additionally, in cases of refunds, it can be expected that the refund will be thoroughly examined, as the approval of the tax office is required for the refund of input tax.
3) Construction services are classified as a work delivery for sales tax purposes. Civil contract design does not affect this, as long as the economic outcome is consistent. A work delivery occurs when the manufacturer of the work uses materials procured for the work that are not just ingredients or incidental items.
4) Input tax deduction is possible for all expenses mentioned here. Expenses for the property are not depreciated as they are not subject to wear and tear. However, this is a matter of income tax and does not affect input tax deduction.
In general, you can claim all costs incurred during construction from the tax office. The limit is always set by private co-causation and potential disproportionality.
I hope that these explanations have provided you with a sufficient overview of the situation in the context of your consultation and initial advice, and remain
Yours sincerely,
Michael Herrmann
Tax advisor
Diploma in Financial Management (FH)
