Builder of the garden faces inaccurate taxation on garden construction by the local tax office
In a surprising turn of events, a Federal Fiscal Court decision has granted a tax allowance to garden owners who undertook extensive earth and planting work in their garden. The decision overturns previous judgments made by the tax office and the tax court, which had rejected the applied tax allowance.
The garden in question required a retaining wall at the border with the neighboring property as part of the earth and planting work. This work, initially considered as household-related services by the tax office and the financial court, was reclassified as craftsman services following the Federal Fiscal Court's decision.
The plaintiffs, who are the owners of a self-occupied house completed in 2003, applied for a tax allowance for the costs of the earth and planting work and the construction of the retaining wall. However, their application was initially rejected.
The Federal Fiscal Court's decision is based on the principles that the earth and planting works in question are not domestic chores but are fundamentally craft activities. The court highlighted that the term "household-related service" is not legally defined, but services must have a sufficient connection to household management or be related to it. In this case, the earth and planting works in the garden, if they are beyond usual domestic gardening care, can qualify for the tax privilege for craftsman services.
The Act on the Tax Promotion of Growth and Employment (FoerderWachstG) of 26 April 2006 expanded the scope of application of § 35a EStG, which now includes the use of craftsman services for renovation, maintenance, and modernization measures carried out in a domestic household of the taxpayer. As a result, the tax allowance was granted for the use of craftsman services for renovation, maintenance, and modernization measures, but not for household services.
Simple craft tasks, such as regular repair and maintenance measures, which were previously treated as household-related services, are now covered by the new sentence 2 in the version of the FoerderWachstG. This means that even these tasks, when carried out by a craftsman, can now qualify for the tax privilege.
The plaintiffs had extensive earth and planting work done in their garden by a craftsman, and the Federal Fiscal Court's decision has secured a financial benefit for them. This decision sets a precedent for similar cases, clarifying the tax treatment of craftsman services in the context of garden work.
