Who pays the higher VAT?

At a glance:

Construction projects for which the acceptance will take place until the end of 2020 can still be billed at the reduced VAT rate of 16 percent.
If the acceptance can only take place after the VAT increase due to delays in construction, although completion was planned for 2020, 19 percent VAT will be due.
The customer has to pay the higher VAT rate. However, in such cases the question arises whether the customer has a claim for damages.
If problems arise on the construction site, there is still something else tradesmen can do to cover themselves in the event of a dispute. A building lawyer gives tips.

Private customers can still benefit from the reduced VAT rate until the end of this year – this also applies to construction projects for which acceptance will take place in 2020. From 2021 onwards, 19 percent will be due again – i.e. 3 percentage points more than before. But what is the legal basis for VAT if there are delays in construction and the plant – contrary to what was planned – can no longer be completed in 2020?

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Acceptance only in 2021: which VAT rate applies to the final invoice?

“If the acceptance of a building project does not take place until 2021, tradespeople must compulsorily charge 19 percent VAT,” says Alexander Jakobs, specialist lawyer for building and architectural law at Jakobs Juchem und Partner Rechtsanwälte. This also applies if completion was actually planned for 2020.

Who has to pay for the higher VAT?

If the completion of a construction project including acceptance is delayed until the new year, according to construction lawyer Jakobs, customers must definitely pay the higher VAT. However, the subject of VAT for craftsmen should not be ticked off.

“In such cases, the normal principles apply that also otherwise apply to delays in construction,” says Jakobs. Therefore, it could be that the customers have a claim for damages because of the construction delay. In the dispute over VAT, according to the lawyer, it must therefore be clarified who is responsible for the delay.

And what are the consequences for those who are to blame for the delay in construction? “He has to pay for the financial consequences of the delay,” says Jakobs. For example, for the difference in the tax rate, which results from the VAT increase at the turn of the year. However, the lawyer points out that a delay on the construction site can result in additional costs.

Building impediment: what can companies do?

Construction lawyer Jakobs advises tradespeople who are hindered in their work on the construction site to act immediately: “Submit a notice of construction hindrance so that you can prove that you are not responsible for the delays.” But what is important?

Form: According to Jakobs, whether an e-mail is sufficient for a building obstruction notification or whether a letter with a signature is required depends on the contract. “Sometimes it is stipulated in what form a building obstruction notice must be received.”
Point of time: “A building impediment notification must be made immediately,” says the building lawyer. This means: The notice of disability must be drawn up “as quickly as possible”.
The content: Notices of obstruction are intended to enable builders to remedy existing defects on the construction site. According to the lawyer, craftsmen should therefore provide answers to the following questions in their letter: What is the problem? Which work can therefore not be carried out as planned? Is the performance of the work only made difficult or completely hindered? What are the consequences for construction progress?
End of the construction hindrance: However, once a deficiency has been rectified, tradespeople should not simply resume work on the construction site. “Be sure to inform the client in writing when you will continue working there,” recommends Jakobs. “Then, in the event of a dispute, you can prove not only the start of the construction hindrance but the entire period of the construction hindrance.”

You can read more about this in the article “This is how a building obstruction notice works”.

Craftsman responsible for construction delay: what to do?

Sometimes the craftsmen themselves are responsible for the delays on the construction site. But what can you do if it becomes apparent before the VAT increase that you will not be able to meet the decrease agreed for 2020 through your own fault? Lawyer Alexander Jakobs does not see much room for maneuver in such cases. His tip: “Craftsmen can try to speed up the work so that the construction site can be completed in 2020.”

If that doesn’t help, the lawyer believes that there is only one option: “Then craftsmen should speak to their client and try to find an agreement.”

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