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Household services when installing a fireplace

October 11, 2012 | 25,00 EUR | answered by RAin/StBin Henriette Regulla-Schiessl

Dear lawyers,
please send me a non-binding price offer to answer the following legal question(s):
In 2010, I installed a fireplace in my own condominium. The labor costs/handyman services included in the invoice, approx. €1340, were deducted as household-related services in my tax return.
After initially being recognized in the tax assessment, it was revoked on 13.07.2011 with the following reasoning:
"Your household-related services were reduced by €1,340 (fireplace installation) as part of your amendment application. The installation of a fireplace constitutes an increase in substance and therefore a new construction measure, which is not tax-advantaged according to § 35a EStG."

On 05.08.2011, I lodged an objection:
"I object to the subsequent revocation of household-related services on the grounds that the installation of our fireplace is not a modernization, which constitutes a household-related service according to § 35, but a new construction measure. It is true that the fireplace was newly installed, but this was necessary for our intention to modernize (make more modern) the heating of our living unit. The central heating of the residential complex is provided by a gas-powered central heating system. The heating system was built in the mid-nineties and corresponds to the technology of that time. Fossil fuels are burned with the corresponding CO2 emissions. The fireplace we installed has a heating capacity of 8 kW and is sufficient to heat the apartment. Since the commissioning of our fireplace, we have turned off the radiators in the living rooms, thus reducing the consumption of fossil fuels and the related CO2 emissions. Heating has since been done with the renewable fuel wood, the combustion of which is CO2-neutral. These facts should be classified as modernization, especially since such modernizations of heating systems may even be eligible for (tax) subsidies. I am aware that the above tax assessment was provisional in parts. However, since the provisional nature and my objection do not relate to the positions in question, the amendment made in my opinion is not permissible. Therefore, I request that my objection be upheld."

On 31.08.11, the tax office rejected the objection:
"Reasoning:
For the use of craft services for renovation, maintenance, and modernization measures, the tariff income tax is reduced by 20% on request, up to a maximum of €1200, of the taxpayer's expenses (§ 35a EStG). The costs incurred for the subsequent installation of components, through which the usable area of the building is not increased but serve an additional function in the building, such as the installation of a fireplace, are not deductible as maintenance or modernization expenses. The deduction of the expenses was to be denied."

On 05.09.11, I replied:
"I confirm that I maintain my objection regarding the recognition of the costs for the modernization of my heating system through fireplace installation

RAin/StBin Henriette Regulla-Schiessl

Dear inquirer,

Thank you for your inquiry, which I will gladly answer within the scope of an initial consultation, taking into account your contribution and the rules of this platform. The response will be based on the information you provided. Adding, omitting, or changing information, ambiguities, or inaccuracies in the facts can change the tax result.

Based on your description, I understand that the costs for the work amount to EUR 1,340. Of this, 20% is deductible, meaning EUR 270.00 will reduce the income tax debt. In the objection procedure, the aggravation was permissible, and only by withdrawing the objection could the aggravation have been prevented. Now, the decision on the objection was issued on 28.09.2012, and a complaint should be filed within a month.

I would like to note that you have argued well. However, I must say that the chances of success in a lawsuit are slim.

According to literature views (Schmidt, EStG 28th ed.2009, § 35a Rn11), the craftsman services must involve renovation, maintenance, and modernization measures. Essentially, the same principles apply here as in distinguishing between maintenance and construction expenses. According to Schmidt, nothing new should be created, such as the installation of new previously non-existent systems. Benefited are, for example, the replacement of flooring, doors, windows, or their repair. Painting or wallpapering, as well as garden and pathway construction work, and the maintenance of technical systems, are also eligible.

Since the fireplace involves the installation of a new system, I see poor chances of enforcing this as a craftsman service.

For court costs, an advance of EUR 220.00 is initially required by the court. The minimum amount in dispute for costs is 1,000 EUR. The court costs will be finally determined after the conclusion of the proceedings. The fees for a lawyer or tax advisor are based on the RVG. With a minimum amount in dispute of 1,000 EUR, the lawyer's fees amount to approximately 310 EUR (procedural fee 1.6 factor, appointment fee 1.2 factor with a flat fee and VAT). However, I always make a fee agreement for lawsuits, as the statutory fee does not cover the expenses.

So, you can see that apart from the, in my opinion, slim chances of success, the costs outweigh the benefits.

I hope this information has been helpful to you.

Best regards,

Henriette Regulla
Lawyer
Tax advisor