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Reverse-Charge procedure: Protection of trust for construction service providers

In preliminary legal protection proceedings, the Fiscal Court of Münster has ruled, that in cases of missing Reverse-Charge procedures, principles of protection of trust may be an obstacle on claiming from the construction service provider.

The claimant rendered construction services for a property developer, who built on his own land for the purpose of selling the property. In the claimant’s turnover tax assessment for the year in question which was 2011, the claimant documented construction services liable to turnover tax, according to the constitution of the administration at that time, for which the recipient of the construction services owed turnover tax. Within the framework of a special turnover tax inspection in 2015, the tax authority was of the opinion that the previous decree was no longer relevant, due to jurisdiction amended by the Federal Fiscal Court (BFH-verdict from 22.8.2013, Az. V R 37/10).

The Federal Fiscal Court had decided that property developers can no longer be considered liable for turnover tax, as they do not provide construction services in the sense of the turnover tax law and in that they provide developed properties (STB Web reported previously).

Contrary to the amended turnover tax assessment note for 2011, the claimant appealed to the protection of trust. 

In the preliminary legal protection proceedings the Fiscal Court of Münster expressed serious doubts regarding the lawfulness of the amended assessment note (decree dated 12.08.2015, Az.15 V 2153/15 U). According to the ruling of protection of trust in the Fiscal Code, the court may not decide to the disadvantage of the taxpayer when reversing or amending a tax assessment note, in that an administrative provision by a Supreme German Federal Court is no longer in conformity with the current law (§176 Abs. 2 AO).

Likewise, the transitional provision for turnover tax, which excludes the application of §176 AO in such cases according to its wording, does not necessary allow for an amendment of turnover taxing according to the Fiscal Court in Münster. According to the senate, there are doubts as to whether the transitional provision unfolds a retroactive effect, which is constitutionally illegal, because it intervenes in an existing reverse charge at a later point in time. The transitional provision may also be contradictory with the European legal statutory provisions of clarity and foreseeability.