Ask a tax advisor on the topic of Sales tax / Turnover tax

Value added tax on handicraft or construction activity abroad

July 20, 2016 | 35,00 EUR | answered by StB Patrick Färber

I am a craftsman based in Germany. We are currently renovating apartments in Austria for a client. We source the materials locally in Austria and install them there. The project will take approximately 6-8 weeks, during which time we will be on site. We have only brought tools and machinery from Germany, which we will take back with us later.

(Activities: clearing out, renovation, disposal, partition walls, suspended ceilings, flooring, kitchen/bathroom installation, etc.)

The client (owner of the apartments) resides in a third country (non-EU). However, he has an Austrian VAT ID because he rents out apartments there, so VAT is applicable in Austria.

I now have to issue the first invoice.

Do I have to charge VAT to the customer? Is the whole thing VAT-exempt?
He says it seems strange to him if I charge German VAT, as he must claim the VAT as input tax against the Austrian tax authorities.

StB Patrick Färber

Dear inquirer,

You are providing a service on properties in the EU. According to German interpretation, the place of performance is in Austria, § 3a para. 3 no. 1 of the German VAT Act. In any case, no German VAT is applicable.

There is also no intra-community service according to § 3a para. 2 of the German VAT Act, which would require you to invoice net amounts.

As a result, you should have the transaction verified in Austria, as the place of performance is definitely there. If Austria has a EU-harmonized reverse charge system, similar to the one we have, I would suggest that you may need to issue an invoice WITHOUT Austrian VAT, with a reference to reverse charge, and the recipient of the service will pay this tax on your behalf.

Therefore, you need to clarify the VAT situation in Austria. In any case, invoicing with GERMAN VAT is not correct.