(2022) Do tradespeople need to itemise the wage portion separately?

Customers are generally entitled to a correct invoice. This also includes the requirement for tradespeople to itemise the labour costs separately on the invoice. If these are tradespeople's services, it can lead to tax savings.

Expenditure on tradespeople's services is directly deductible from the tax liability at 20%, up to a maximum of 1.200 Euro per year. Only pure labour costs and any invoiced machine and travel costs plus the applicable VAT are eligible. In addition to the aforementioned pure labour costs, costs for disposals considered ancillary to the main service (e.g. removal of tiles during bathroom retiling) and invoiced costs for consumables (e.g. tape, protective sheets, lubricants) are also eligible. However, costs for materials and other supplied goods are not eligible.

Labour costs must be ascertainable from the details in the invoice. The question is whether the customer has a legal right for the tradesperson to itemise the labour costs separately on the invoice.

Currently, the Mülheim District Court has ruled that customers have a legal right to an itemised invoice with separate disclosure of labour costs. This is because only then can they deduct tradespeople's services or household-related services for tax purposes in accordance with § 35a para. 2 EStG. So, that's settled! (Mülheim District Court, 30.7.2015, 12 C 1124/14).

The company's obligation arises from § 242 BGB, not to harm the contractual partner. Regarding the tax implications of invoicing, it is also irrelevant whether the client can specify the invoice amount themselves. As long as the company withholds the invoice, the client can even withhold payment under § 273 BGB, as the private legal claim to an invoice is a secondary obligation of the service provider to the paying service recipient.

Note: There are always service providers who demand cash payment. On the other hand, there are also clients who pay an invoice in cash - possibly unaware of § 35a EStG. In these cases, the tax office will refuse the deduction as a household-related service or tradespeople's service - no amount of complaining will help. CURRENTLY, the Eisenhüttenstadt District Court has ruled that the client has no claim for reimbursement against the service provider for the amount of the lost tax reduction (judgment of 8.3.2021, 5 C 65/20).

In the case in question, a taxpayer had hired a moving company for a private move and paid the invoice in cash. After not receiving a tax reduction, he demanded a refund from the moving company. However, according to the court, the company is neither obliged to encourage its customers to make non-cash payments nor to inform them about tax consequences. As part of their own responsibility, the client must take care of their own tax matters (Source: Trinks, NWB Expertenblog, "Handwerker & Co. haftbar für Steuerschaden durch Barzahlung?").