Value added tax disclosure and offsetting in commercial ancillary cost settlement
May 25, 2009 | 40,00 EUR | answered by Michael Herrmann
Dear Sir or Madam,
For years, I have been receiving what I believe to be an incorrect statement of operating costs from the landlord of my rented commercial premises.
According to the lease agreement, I pay a monthly operating cost of 300.00 euros plus value-added tax.
The annual operating cost statement lists gross amounts, such as individual items like general electricity, water, heating, caretaker, and property management. All of these amounts also include VAT, which is separately stated.
Now my question - if I pay 300 euros net monthly, totaling a gross amount of 4284 euros, shouldn't the paid gross amount be offset? However, currently the paid net amount is being offset against the gross amounts of the operating costs. In my opinion, this is not correct and I would like to request information regarding the legal basis for this.
Dear inquirer,
First of all, thank you for your inquiry, which I would be happy to answer based on the information provided and considering your minimum stake in an initial consultation. The response is based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Commercial rental leads to a VAT taxable exchange of services. VAT at a rate of 19% is added to the consideration (net rent). The VAT paid can be deducted by you, the recipient of the service, as input tax, so that the VAT paid does not have a burdening effect.
This service exchange also includes contractual ancillary services, such as the disputed incidental costs. Therefore, you will also be invoiced net and the VAT will be added.
The same applies to the monthly advance payments for utilities. These are to be treated as advance payments and are subject to VAT upon payment. An invoice will be issued, e.g. 300.00 EUR plus 57.00 EUR = 357.00 EUR.
In the annual settlement with credit for the advance payments made, it should be noted that the input tax included in the advances will be shown as a deduction if the settlement is gross. In a net settlement, only the VAT portion needs to be shown on a payment due.
Example of a net settlement:
Utility costs 2008 (net): 4,000 EUR
Advances 2008 (net): - 3,600 EUR
Total: 400 EUR
VAT 19%: 76 EUR
Amount due: 476 EUR
Example of a gross settlement:
Utility costs 2008: 4,000 EUR
VAT 19%: 760 EUR
Total: 4,760 EUR
Advances paid: - 3,600 EUR
VAT: - 684 EUR
Total: - 4,284 EUR
Amount due: 476 EUR
You can see that both settlement methods result in the same outcome. A settlement where the gross amount is netted with the advances is simply mathematically incorrect. There is no legal basis for this.
I hope this information has given you an initial overview of the situation and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
