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Invoice for construction services for a client from Germany

29.06.2023
Invoice for construction services for a client from Germany

Invoice for construction services for a client from Germany

Not sure how to account for construction services provided in Germany? Check out the applicable rules. We explain how to issue an invoice for construction services for a German client – 2022.

 

Invoice for construction services for a German client and the place of service provision

To know how to issue an invoice for taxable construction services in Germany, it is necessary to familiarize oneself with the relevant regulations. First and foremost, one must understand what the VAT Act specifies. The individual provisions of the Value Added Tax Act state:

Art. 28b – Indicates that the place of taxation for services provided to a taxpayer is the place where the recipient, who is a service recipient, has their business establishment.

Art. 28c – Relates to services provided to entities that are not taxpayers. Taxation occurs in the country where the service provider has their business establishment.

Art. 28e of the VAT Act indicates that the place of service for services related to real estate is the location of that property. This article also covers services provided by appraisers, real estate agents, accommodation services in hotels or similar establishments such as resorts or designated camping areas, the use and enjoyment of real estate, and most importantly, the preparation and coordination of construction work, such as services provided by architects and construction supervision.

VAT liability – Germany or other country UE?

As can be deduced from the aforementioned articles of the VAT Act, construction services related to property located in Germany are subject to VAT taxation in that country, in accordance with its regulations and rates.

Therefore, a construction service performed on such property will not be subject to VAT in other EU country. Matters such as for whom the construction services are performed and the location of the service provider’s establishment are irrelevant. Only the location of the property matters, which, in this case, is Germany. In such a scenario, the construction company is subject to VAT taxation in Germany and is obligated to register for VAT purposes in that country.

All tax regulations of that country will apply accordingly

To register for VAT as a VAT EU taxpayer, one must submit an updated VAT-R form to the competent tax office, providing identifying information about the service provider. This will establish the service provider as a VAT EU taxpayer.

  • Quotes from contractors – from Clients
  • Construction services for a business entity

If a construction company provides services to a German entrepreneur, the responsibility for VAT settlement and payment of the tax lies with the entrepreneur.

In such a case, the company issues an EU invoice without the tax amount (VAT rate “NN”).

The document should also include the note “reverse charge.” It should be noted that the regulations clearly state that in the construction industry, an invoice with the “NP” VAT rate is issued only when the purchaser of the service is liable to pay VAT. This tax settlement occurs within the scope of importing services.

VAT for construction services for individuals in Germany

If a service is provided to an individual who is not a VAT taxpayer, the VAT liability cannot be shifted to them.

In this case, an invoice with the “reverse charge” annotation cannot be issued.

Such a service will not be subject to taxation in other EU country. For these types of services, income tax must be paid in the country where the construction service is performed. It is also important to note that such services should not be reported on the EU VAT declaration.

Record-keeping for construction services conducted outside the country

Article 109(3a) of the VAT Act is another provision to be acquainted with when providing construction services in Germany, for example. If a service is performed in another country, the company is obliged to record specific data in its records. This includes stating the service’s name, the value of the service excluding value-added tax or similar tax, taking into account the moment when the tax liability arises for this type of service provided within the country.

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