To what extent can a tax reduction under § 35a EStG be claimed for tradesman services provided by one's own GmbH? In particular, where the amount is offset against the shareholder account.
Tax Reduction for Tradesman Services
Under § 35a Abs. 3 S. 1 EStG, 20% of the costs for tradesman services relating to renovation, maintenance and modernisation measures may, upon application, be deducted from the assessed income tax. The maximum amount is EUR 1,200 per calendar year. Only labour costs and machine hours are eligible; material costs are not. The conditions for claiming the tax reduction are that the taxpayer receives a proper invoice and that payment is made to the account of the service provider in accordance with § 35a Abs. 5 S. 3 EStG.
Case in Dispute: XY-GmbH Provides Tradesman Services for a Shareholder
The claimant is a master roofer by profession and a shareholder of XY-GmbH. In the year in dispute, 2017, he commissioned the company to carry out tradesman services on his private home. For the services rendered, the GmbH issued him a proper invoice, which was settled via the shareholder clearing account. No monetary payment was made by the shareholder. In the 2017 tax return, the claimant sought to deduct the services rendered by the GmbH under § 35a EStG. The tax reduction was, however, disallowed both by the tax office and in the subsequent objection proceedings before the fiscal court.
BFH Ruling (BFH Decision of 9 June 2022, VI R 23/20)
The condition for a tax reduction in respect of tradesman services is that payment is made to the account of the service provider pursuant to § 35a Abs. 5 S. 3 EStG. In formal terms, this means an account held with a credit institution (bank account). Without the involvement of such an account, and thus documentation of the payment transaction, this element of the statutory provision is not satisfied. The offsetting of the credit via a shareholder account of the GmbH is not sufficient. This is not an account of the providing GmbH, but rather the claimant's account with the GmbH. The BFH therefore concurred with the tax office and the fiscal court and dismissed the claim as unfounded.
Frequently asked questions
Frequently asked questions
Can a tax reduction under § 35a EStG be claimed when offset via the shareholder clearing account?
No. The BFH ruled in its decision of 09 June 2022 (VI R 23/20) that offsetting a GmbH's craftsman invoice via the shareholder clearing account does not meet the requirements of § 35a Abs. 5 sentence 3 EStG. The shareholder clearing account is not an account of the service provider (the GmbH), but an account of the shareholder held with the GmbH.
Which payment requirements does § 35a Abs. 5 S. 3 EStG impose for the tax reduction on tradesman services?
Payment must be made cashlessly to a bank account of the service provider held at a credit institution. A proper invoice is also required. Cash payments or mere set-offs without a documented bank transfer are not recognised.
To what extent can tradesman services be claimed for tax purposes under § 35a Abs. 3 EStG?
Taxpayers may deduct 20% of the eligible expenses, up to a maximum of EUR 1,200 per calendar year, directly from their personal income tax liability. Eligible services include renovation, maintenance, and modernization work performed within the taxpayer's own household.
Which cost components of a tradesperson's invoice are eligible under § 35a EStG?
Only labor costs as well as machine and travel costs are eligible. Material costs are excluded from the tax reduction and must be shown separately on the invoice so that the labor portion is clearly identifiable.
How should a shareholder pay for tradesman services rendered by their own GmbH in order to claim § 35a EStG?
The shareholder should actually pay the invoice amount by bank transfer to the GmbH's account, rather than offsetting it via the shareholder current account. Only then is the payment flow to an account of the service provider documented within the meaning of § 35a Abs. 5 S. 3 EStG, and the tax reduction will be recognised.