Don't forget the construction withholding tax for renovations, or you'll be liable!
Tax evasion is no trivial offense. We've known this at least since celebrities were arrested or even imprisoned for tax evasion under intense media scrutiny. What many real estate investors don't realize is that we landlords, too, can quickly find ourselves facing charges for tax evasion in certain areas. And claiming ignorance won't help you. In this video, we'll discuss what this entails, what you as a property owner need to be aware of, and how to protect yourself. It's a topic every landlord should at least be familiar with to avoid problems with the tax authorities and criminal prosecution. So, be sure to watch the video and feel free to share it with other property owners.
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What is this topic about? It's about the "construction withholding tax," officially referred to as "tax deduction for construction services." The construction withholding tax obligates the client to remit 15% of the gross invoice amount – including VAT – not to the contractor (the service provider), but to the tax office.
The construction withholding tax applies to construction services; broadly speaking, the "construction, repair, alteration, or even demolition of buildings." There are further criteria and definitions to distinguish what constitutes a construction service. We don't want to bore you with too many details, but rather raise your awareness of the topic in general. At the end of the video, we'll show you a practical solution so you can avoid problems with the tax office from the outset. And as always, a brief disclaimer is in order: we are not providing tax advice here, but rather sharing our experience.
The legislator has established a tax-free allowance of €5,000 gross per year for construction services, meaning that smaller projects are exempt from this tax. WHO is actually affected by this tax? Who can become liable for it? Besides businesses that commission a German or foreign construction company to carry out construction work, it also applies to landlords who rent out more than two apartments. However, this only applies to construction work exceeding €15,000 gross per year. From conversations with landlords, we know that many are unaware of this obligation to withhold construction tax, hence this video. Even if you currently only rent out one or two apartments, you should have heard of the construction withholding tax and have a basic understanding of what it entails. Because if you want to build wealth with real estate, you will eventually be affected. What practical solutions are there to avoid this tax and the associated bureaucracy and discussions with tradespeople? You'll find out in the video. We also provide information on how to register and pay the tax to the tax office. We also give specific tips on how to avoid problems – especially with smaller and foreign companies.
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►► Were you already fully familiar with the topic of "construction withholding tax"? And if so, what was your experience with it in practice – in communicating with your contractors? Feel free to leave a comment telling me what other topics you'd like me to cover in a video.
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We help our clients achieve financial freedom through real estate. We do this with over 20 years of experience. We now want to share this expertise with you on our YouTube channel. Would you like to deepen your real estate knowledge or even invest your own capital in real estate? Then you've come to the right place.