News on the HOAI — draft of the HOAI amend­ment ordi­nance; change in the VAT rate on archi­tec­tur­al and engi­neer­ing ser­vices*

There are two leg­isla­tive devel­op­ments in the field of archi­tec­tur­al and engi­neer­ing ser­vices to which pub­lic clients, but also con­trac­tors and bid­ders, should cur­rent­ly pay par­tic­u­lar atten­tion. The first is the new ver­sion of the HOAI. Accord­ing to this, a new HOAI is to be expect­ed as of Jan­u­ary 1, 2021. Sec­ond­ly, the effects of the tem­po­rary change in the VAT rate; this is par­tic­u­lar­ly the case because a high­er VAT rate gen­er­al­ly leads to a high­er defin­i­tive eco­nom­ic bur­den for the pub­lic sec­tor.

New autho­riza­tion basis for the enact­ment of the HOAI

Ini­ti­at­ed by the ECJ rul­ing of July 4, 2019 (Case C‑377/17), the Ger­man leg­is­la­ture is cur­rent­ly in the process of rewrit­ing the enabling basis for an amend­ment to the HOAI. This is also nec­es­sary. The HOAI is a statu­to­ry ordi­nance, and statu­to­ry ordi­nances require a for­mal statu­to­ry autho­riza­tion basis that reg­u­lates the con­tent, pur­pose and extent of the statu­to­ry ordi­nance to be issued, cf. Art. 80 (1) sen­tence 2 GG. In the mean­time, a “draft law amend­ing the law reg­u­lat­ing engi­neer­ing and archi­tec­tur­al ser­vices and oth­er laws” has been pre­sent­ed by the Fed­er­al Gov­ern­ment; it has even already been passed by the Ger­man Bun­destag (BT-Drucks. 19/21982). An essen­tial com­po­nent of this new ver­sion of the enabling leg­is­la­tion is the elim­i­na­tion of bind­ing min­i­mum and max­i­mum rates. On the one hand, the future HOAI is intend­ed to pro­vide ori­en­ta­tion for the amount of the fee in indi­vid­ual cas­es; on the oth­er hand, it is still intend­ed to serve as a basis for cal­cu­lat­ing the fee, which can then be changed by means of addi­tions or deduc­tions. How strict the guide­line char­ac­ter of the HOAI fee is to be is still unclear. The Fed­er­al Coun­cil, to which the draft has also already been sub­mit­ted, seems to want a detailed reg­u­la­tion of the appro­pri­ate­ness require­ments. It takes the view that an “explic­it appro­pri­ate­ness pro­vi­sion in the statu­to­ry enabling statute itself” could “facil­i­tate the judi­cial review of fee claims and help to avoid pro­tract­ed dis­putes” (state­ment of Sep­tem­ber 18, 2020, BR-Drucks. 445/20). So it remains to be seen how strict the guid­ing reg­u­la­tions will ulti­mate­ly turn out to be.

HOAI Amend­ment Reg­u­la­tion

In the mean­time, a draft of an “Ordi­nance amend­ing the Fee Reg­u­la­tions for Archi­tects and Engi­neers (HOAI Amend­ment Ordi­nance)” (here­inafter: HOAI‑E) dat­ed August 7, 2020 by the Fed­er­al Min­istry for Eco­nom­ic Affairs and Ener­gy is also avail­able. Inter­est­ing is already the future § 1 HOAI‑E, accord­ing to which the reg­u­la­tions of the HOAI “can” be tak­en as a basis — thus not “must”. This pro­vi­sion is there­fore along the same lines as the enabling leg­is­la­tion cur­rent­ly going through the par­lia­men­tary pro­ce­dure. Sec­tion 2 (12) HOAI‑E is also along the same lines. The pro­vi­sion stip­u­lates that the fee scales shall show “ori­en­ta­tion val­ues” that are “geared to the type and scope of the task as well as to the ser­vice.” Fur­ther­more, the “basic fee rate” is men­tioned, which, accord­ing to Sec­tion 2 (13) HOAI‑E, is “the respec­tive low­er fee rate con­tained in the fee tables of this ordi­nance.” Fur­ther­more, among oth­er things, § 7 HOAI‑E replaces the writ­ten form with the text form and pro­vides in para­graph 1 that in the absence of an “agree­ment on the amount of remu­ner­a­tion in text form”, the base fee rate is deemed to be agreed. Sec­tion 7(2) HOAI‑E is also inter­est­ing, as it states that the con­trac­tor must “inform the client, if he is a con­sumer, in text form at the lat­est when sub­mit­ting an offer” that “a high­er or low­er fee may be agreed than the val­ues con­tained in the fee tables of this Reg­u­la­tion.” For the inclined read­er, the fol­low­ing thought may be instruc­tive in this con­text: con­sumer pro­tec­tion can be ensured through infor­ma­tion or through author­i­ta­tive rule­mak­ing. One can speak sim­plis­ti­cal­ly of the infor­ma­tion mod­el on the one hand and the social mod­el on the oth­er. While the infor­ma­tion mod­el assumes that con­sumers are mature and capa­ble of being informed, and there­fore want to be informed, the social mod­el assumes that con­sumers are less will­ing to be informed and need to pro­tect them­selves. Accord­ing­ly, the infor­ma­tion mod­el works with infor­ma­tion, label­ing and edu­ca­tion oblig­a­tions, where­as the social mod­el works with the law on gen­er­al terms and con­di­tions, the order­ing of the manda­to­ry or semi-manda­to­ry valid­i­ty of legal norms and close-meshed judi­cial con­trol pow­ers. As men­tioned above, the Bun­desrat — and not only the Bun­desrat — would like to see guide­lines on the appro­pri­ate­ness of fees; from the point of view of con­sumer pro­tec­tion, this is an approach that is more in line with the social mod­el. The leg­is­la­tor of the ordi­nance, on the oth­er hand, appar­ent­ly relies more on the infor­ma­tion mod­el, where­by the cur­rent word­ing is very reduced. The leg­is­la­tor also has some­thing to gain from the social mod­el when it speaks of “ori­en­ta­tion val­ues” in Sec­tion 2 (12) HOAI‑E, but does not explic­it­ly lim­it this ori­en­ta­tion func­tion to con­sumer pro­tec­tion — at least in the text of the draft, but not in the expla­na­tions on this. Ulti­mate­ly, care must be tak­en to ensure that the social mod­el is not mis­used for the sake of argu­ment to pro­tect estab­lished mar­ket par­tic­i­pants — and pre­cise­ly not con­sumers — from a sup­posed drop in prices. Par­tic­u­lar­ly when the text of the reg­u­la­tion seems to opt rather for the infor­ma­tion mod­el.

Reduced VAT rate of 16% and the billing of archi­tec­tur­al and engi­neer­ing ser­vices

A com­plete­ly dif­fer­ent, cur­rent­ly even more impor­tant top­ic is sales tax. As is well known, the gen­er­al sales tax rate has been reduced from 19% to 16% for the peri­od from July 1, 2020 to Decem­ber 31, 2020. Some time ago, the Fed­er­al Min­istry of Trans­port and Dig­i­tal Infra­struc­ture issued a cir­cu­lar on the effects of the sales tax reduc­tion for the fed­er­al trunk roads sec­tor (cf. Gen­er­al Cir­cu­lar Road Con­struc­tion No. 16/2020 “Tem­po­rary change in sales tax rates in the peri­od from 01.07.2020 to 31.12.2020” dat­ed 09.07.2020 — Ref.: StB 14/7131.4/026–3341053). The instruc­tions giv­en there are of inter­est not only to the fed­er­al admin­is­tra­tion, but also to every pub­lic con­tract­ing author­i­ty that awards con­tracts for archi­tec­tur­al and engi­neer­ing ser­vices, as well as to every archi­tec­tur­al or engi­neer­ing firm. We sum­ma­rize them in key­words, how­ev­er — if you have spe­cif­ic ques­tions — you should con­sult the cir­cu­lar direct­ly, con­sult appli­ca­tion aids in your area and, of course, also seek legal assis­tance in cas­es of doubt:

  • In prin­ci­ple, the ques­tion of which VAT rate is applic­a­ble depends on the time at which the ser­vices were per­formed. If the ser­vices were per­formed after June 30, 2020, but before Jan­u­ary 1, 2021, the sales tax rate is 16%. Val­ue added tax is not includ­ed in the fees cal­cu­lat­ed in accor­dance with the HOAI.

  • In the case of “con­tracts for work and ser­vices includ­ing archi­tec­tur­al and engi­neer­ing ser­vices”, the peri­od of per­for­mance shall gen­er­al­ly be the time of com­ple­tion of the work. This is because com­ple­tion reg­u­lar­ly coin­cides with accep­tance.

  • The ser­vices which are based on the ser­vice spec­i­fi­ca­tions of the HOAI are “in prin­ci­ple” uni­form ser­vices, even if the over­all ser­vice is “divis­i­ble accord­ing to the descrip­tion in the HOAI, in par­tic­u­lar through the break­down of the ser­vice spec­i­fi­ca­tions into ser­vice phas­es”. The “break­down of the ser­vice pro­files for the pur­pose of deter­min­ing the (par­tial) fee” alone does not lead to the assump­tion of par­tial ser­vices with­in the mean­ing of Sec­tion 13 (1) no. 1a UStG.

  • How­ev­er, par­tial ser­vices are to be assumed if “addi­tion­al agree­ments on the sep­a­rate exe­cu­tion and remu­ner­a­tion of indi­vid­ual ser­vice phas­es have been made with­in the frame­work of the over­all con­tract for a ser­vice pro­file”. “Oth­er­wise”, ref­er­ence is made to No. 2 of the cir­cu­lar; there it is stat­ed that the reduced tax rate for ser­vices ren­dered after June 30, 2020 also applies inso­far as advance pay­ments or pay­ments on account have been made before July 1, 2020.

  • Also of inter­est are the notes con­cern­ing the imple­men­ta­tion of new award pro­ce­dures, which will not be repro­duced here but are best con­sult­ed direct­ly.

*This legal tip is no sub­sti­tute for legal advice in indi­vid­ual cas­es. By its very nature, it is incom­plete, it does not relate to your case, and it also rep­re­sents a snap­shot, as the legal basis and case law change over time. It can­not and does not cov­er all con­ceiv­able con­stel­la­tions, serves main­te­nance and ini­tial ori­en­ta­tion pur­pos­es and is intend­ed to moti­vate you to clar­i­fy legal issues at an ear­ly stage, but not to dis­cour­age you from doing so.

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