Overview
Background information on construction work insurance
Setting up construction work insurance in the contract terms
Presentation in the invoice review and on the invoice cover sheet
Note:
Please note that this does not constitute legal or tax advice. Therefore, please coordinate the exact handling of construction work insurance in your project with your tax advisor.
The following information is the result of customer discussions, which have been incorporated into the functional development of the contract terms.
Overview of Construction Work Insurance
With construction work insurance (also: all-risk insurance), the builder secures their construction project against unforeseen damages due to weather, vandalism, construction or material defects.
Since damages caused by executing companies (contractors) are also covered (depending on the scope of insurance), the insurance premium is "passed on" by the builder to the contractors (usually to the executing ones), i.e. deducted from the amount invoiced by the contractor.
In practice, it is negotiated with the contractors or stipulated and contractually agreed that a certain percentage of the agreed reference amount is deducted for the proportional insurance deduction.
Construction work insurance is not a "provision" from the builder and therefore does not reduce the contractually agreed performance or the VAT to be calculated from it.
(Source: Umsatzsteuer-Anwendungserlass of 1 October 2010, BStBl I S. 846 – current version (as of 13 December 2017) - see No. 3.8 Werklieferung, Werkleistunge - para. 2 sentence 3.
Caution:
The insurance itself is generally exempt from VAT. Therefore, the included insurance tax must not be offset against the VAT of the invoiced taxable service.
Setting Up Construction Work Insurance
In the contract terms, you can specify whether construction work insurance should be deducted during the invoice review. In addition to the amount of the deduction in percentage, you can set based on which reference basis it should be calculated and for which invoice types it should be considered.
Presentation in the Invoice Review and on the Invoice Cover Sheet
If a construction work insurance is specified in the contract terms, it will now be taken into account for the associated invoice types.
The calculation is clearly represented on the invoice cover sheet .
For installments, the construction work insurance is initially fully deducted from the audited invoice amount, after deducting the previous installment invoices without considering the construction work insurance.
Subsequently, the construction work insurance portions considered in the previous installments are mathematically added, so that the pure construction work insurance portion of the current invoice is then shown.
Thus, it is clearly shown how high the pure invoiced service is, how high the total deduction for the construction work insurance is, and how high the construction work insurance portion of the current invoice is.
This has the advantage of avoiding mixed tax rates on the cover sheet.