Reverse-Charge & Construction Services in Germany
Construction services are factory deliveries and other deliverables which are used for the production, repair, maintenance, modification or removal of buildings.
The term construction is to be widely interpreted and also includes constructions connected to the ground, e.g. bridges or roads. Construction services must have an effect on the substance of the construction. Construction services are therefore for example construction of a building, fitting windows, doors etc., factory deliveries of items which must be installed in a building, ground work and other.
The location of the construction service is where the site is located, the so-called situs principle. Basically, the beneficiary is liable for tax regarding construction services and it is not dependent on whether he uses it for a construction service generated by himself. It is therefore not usually necessary for construction companies which are subcontractors to be VAT registered in Germany, although there are some exceptions.
VAT registration obligation
Provided the foreign construction company hires other German or foreign subcontractors regarding construction services on a construction in Germany, there is a VAT registration obligation in Germany, as the foreign construction company must register the reverse-charge services of his subcontractor in Germany.
It is also compulsory to register for VAT regarding construction services for private individuals in Germany as private individuals cannot register reverse-charge services. In this case the private individuals must be invoiced stating German VAT.
Summary of the most important points
- The location of the construction service is where the site is located.
- VAT registration is compulsory when foreign construction companies hire further subcontractors for the construction service in Germany.
- Registration is also compulsory in Germany for construction services for private individuals.