Construction contracts run for months and are settled through progress, partial, and final invoices. Clients hold back retentions, pay with a discount, or reduce certain line items. So that it’s clear at the end what each construction site has earned, we assign invoices, payments, and retentions to the respective contract.
Special VAT rules apply to construction services. If you provide construction services to another construction company, under certain conditions the client owes the VAT and you invoice the net amount. The tax advisor determines whether this reverse charge applies. When posting entries, we check whether your invoices are consistent with this and point out any discrepancies. Also note that for advance payments, VAT arises as soon as the payment is received.
If you receive construction services from subcontractors, you may be required to withhold a portion of the payment as construction withholding tax and remit it to the tax office, unless the subcontractor provides a valid exemption certificate. We ensure that an up-to-date certificate for each subcontractor is available in the portal and notify you when one is about to expire.
At year-end, work in progress becomes an issue: services that have already been performed but not yet invoiced. The tax advisor values them in the financial statements; we provide the tax advisor with the contracts, including costs incurred to date and progress payments.
Cash flow in the construction industry is also a matter of timing. Materials and wages are paid immediately, progress invoices only after the client has reviewed them, final invoices often weeks later, and retentions only once the warranty period has expired. With the list of open items per contract, you can see where the money is and follow up as needed. Upon request, we prepare the figures for bank meetings and guarantees.
