Hello everyone,
we are planning to have our house built in Germany by an Austrian company.
The company often builds in Germany and is authorized to submit building permit / planning permission documents in Bavaria.
However, I am uncertain about the information on their website:
Do I understand correctly that if I own a small apartment and rent it out, I am legally considered a business?
And therefore must independently pay the value-added tax (VAT) on the constructed house to the German tax office and may only pay the net amount to the Austrian company? And the company itself does not have to pay tax?
To make it more complicated: If the house is built and paid for by two people jointly, and one owns the apartment while the other does not, would half of the amount have to be paid to the German tax office and the other half by the building company to the Austrian tax office?
we are planning to have our house built in Germany by an Austrian company.
The company often builds in Germany and is authorized to submit building permit / planning permission documents in Bavaria.
However, I am uncertain about the information on their website:
Do I understand correctly that if I own a small apartment and rent it out, I am legally considered a business?
And therefore must independently pay the value-added tax (VAT) on the constructed house to the German tax office and may only pay the net amount to the Austrian company? And the company itself does not have to pay tax?
To make it more complicated: If the house is built and paid for by two people jointly, and one owns the apartment while the other does not, would half of the amount have to be paid to the German tax office and the other half by the building company to the Austrian tax office?
Rübe1 schrieb:
As a private individual, you probably don’t need to worry about what the company does with VAT. However, to be safe, you should ask to see the company’s tax identification number (German) and verify it. If they don’t have one, or won’t show it, stay away.Why does an Austrian company need to have a German tax identification number?
A self-employed tile installer from Poland probably doesn’t have one either and is still legally allowed to provide services in Germany, right?
Harakiri schrieb:
If you own an apartment, you are not considered a business owner unless you have set up a company specifically for that purpose.
And even if you were, you are allowed to build a house privately as a business owner—you would then be a completely normal consumer.My link was removed above.
You can find the site on Google using the term "tax traps when hiring a foreign construction company."
It mentions landlords and small businesses. Is this really only related to landlords who do this "full-time"?
Okay, it seems so.
Google says:
"The Federal Court of Justice (BGH) held the view that this landlord was not a business owner because managing 4 rental units with long-term contracts does not require a systematic commercial operation, and he does not need to maintain an office or an organization for management."
Thanks, that puts my mind at ease!
Here, completely unrelated topics are mixed together.
Asset management, as well as leasing and renting, fall under income tax regulations. These activities do not imply a (commercial) business status.
For VAT purposes, however, the intention to generate turnover is decisive for establishing business status. Therefore, rental services are considered a taxable supply according to §1(1) No. 1 USTG. However, rental to private individuals is exempt from VAT under §4 No. 12 USTG and cannot be overridden by the VAT option under §9 USTG. To my knowledge, zero returns still had to be submitted in the VAT declaration in the past. This is just a preliminary clarification.
Now to the specific case.
If an entrepreneur from Austria builds in Germany, the VAT liability for a service under §3a USTG applies at the location of the property. Hence, VAT must definitely be paid in Germany. If the client is a taxable entrepreneur for VAT purposes, the VAT liability shifts to the recipient under §13b USTG. If there is no entrepreneur, the company must register for VAT in Germany. Meanwhile, there is also the OSS scheme to avoid registration obligations; however, I am currently unsure whether this applies in this specific case.
Now, the landlord is also a taxable entrepreneur for VAT. Therefore, §13b USTG (shift of VAT liability) can certainly apply.
I once heard in a seminar that a small business owner must pay VAT when the tax liability shifts or for intra-community acquisitions but is not allowed to claim input VAT (due to small business status). I can well imagine that this also applies to leasing and renting.
Since none of this constitutes tax advice, I point out that this is a layperson’s opinion and recommend consulting a tax advisor.
Asset management, as well as leasing and renting, fall under income tax regulations. These activities do not imply a (commercial) business status.
For VAT purposes, however, the intention to generate turnover is decisive for establishing business status. Therefore, rental services are considered a taxable supply according to §1(1) No. 1 USTG. However, rental to private individuals is exempt from VAT under §4 No. 12 USTG and cannot be overridden by the VAT option under §9 USTG. To my knowledge, zero returns still had to be submitted in the VAT declaration in the past. This is just a preliminary clarification.
Now to the specific case.
If an entrepreneur from Austria builds in Germany, the VAT liability for a service under §3a USTG applies at the location of the property. Hence, VAT must definitely be paid in Germany. If the client is a taxable entrepreneur for VAT purposes, the VAT liability shifts to the recipient under §13b USTG. If there is no entrepreneur, the company must register for VAT in Germany. Meanwhile, there is also the OSS scheme to avoid registration obligations; however, I am currently unsure whether this applies in this specific case.
Now, the landlord is also a taxable entrepreneur for VAT. Therefore, §13b USTG (shift of VAT liability) can certainly apply.
I once heard in a seminar that a small business owner must pay VAT when the tax liability shifts or for intra-community acquisitions but is not allowed to claim input VAT (due to small business status). I can well imagine that this also applies to leasing and renting.
Since none of this constitutes tax advice, I point out that this is a layperson’s opinion and recommend consulting a tax advisor.
DerBer1 schrieb:
A self-employed Polish tiler probably doesn’t have one either but is still allowed to legally provide services in Germany, right?These are completely separate issues. Tax law is one matter, labor law is a different one, and business regulations (trade regulations) are another entirely. If Oleg works for a private client in Germany, he must pay VAT here. How is he supposed to do that without a tax identification number? It is also clear where the money ends up if there is no tax number.
B
Buschreiter15 Feb 2024 19:10NatureSys schrieb:
No, renting out an apartment does not make you a business owner. Section 2, paragraph 1 of the German VAT Act (UStG) – you can easily verify by searching “you are a business owner if you rent out a condominium” in any search engine. It is just a tax-exempt transaction for long-term rentals (§ 4 UStG)… if you disagree, please explain your position instead of just spouting off.
Found online by searching the phrase: are landlords entrepreneurs:
Conclusion:
The main criterion for whether a landlord is considered an entrepreneur is their commercial activity (§ 14 Building Code), meaning that a certain minimum level of organizational effort must be required for the management of the rental units.
The number of units owned is not the sole deciding factor. In individual cases, the management of as few as two rental units by a professional property management company can qualify a private landlord as an entrepreneur; the Federal Court of Justice (BGH) in one case did not consider four rental units managed by the landlord as sufficient. However, the number of units is an indicator of entrepreneurial status. The more units there are to manage, the more likely it is that a higher minimum level of organizational effort exists and thus that the landlord is acting as an entrepreneur.