Latest VAT News

Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.

Device bonus for mobile phone contracts - BMF letter dated 23 January 2024

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The German tax authorities amended the VAT Application Decree: If a mobile phone company concludes a contract with an intermediary in which it pays the intermediary a commission regardless of whether this intermediary provides a phone to its end customer, this is considered contractual decoupling and the full amount of the commission is then considered the remuneration for the intermediary service.

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Supplies made free of charge and input VAT deduction – BMF circular letter dated 24 January 2024

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The German Federal Ministry of Finance (BMF) aligns with the case law of the ECJ and the German Federal Fiscal Court (BFH): In certain cases, purchases that are only indirectly related to taxed output transactions are also eligible for an input VAT deduction.

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Variable board remuneration is also not automatically taxable: ECJ ruling "TP" of 21 December 2023, C-288/22

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On 13 June 2019, the ECJ ruled in the "IO" case (C-420/18) that the activities of a supervisory board member did not constitute self-employment and were therefore not subject to VAT because the board member did not bear any entrepreneurial risk. The Federal Ministry of Finance subsequently amended its application decree to the effect that fixed remuneration is not taxable, but variable remuneration is. According to the current ECJ judgement "TP", this is no longer tenable in such a generalised way.

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Restaurant visits and catering will become expensive again as the reduced VAT rate expires on 31 December 2023

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Lockdowns during the COVID-19 pandemic placed a heavy burden on the restaurant and catering businesses. To support the industry, a reduced VAT rate of 7% on restaurant and catering services (excluding beverages) was introduced on 1 July 2020 and extended several times. "I agreed to this in the knowledge that we will never abolish it again," said Federal Chancellor Scholz in 2021. However, the recent decision by the Federal Constitutional Court has left a shortfall of 60 billion euros in the federal budget, forcing the federal government to save money. As a result, the VAT rate reduction will now expire at the end of 2023.

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Subscription gifts as an ancillary supply to a magazine subscription

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ECJ judgement "Deco Proteste - Editores Lda" of 5 October 2023 (C-505/22)

Nowadays, magazine subscribers often receive a gift when subscribing, and this gift is often quite valuable. The question here is whether this constitutes a free of charge disposal of goods. If, on the other hand, there is a supply against payment, it must be clarified whether this is considered an independent supply or whether the subscription gift together with the supply of magazines is considered a uniform supply. This has an impact on the VAT rate.

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BMF clarifies detailed questions on e-invoice in a letter dated 2 October 2023

VAT Committee publishes guidelines on fuel cards

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After the ECJ ruling in the "Vega International" case, the BMF (German Federal Ministry of Finance) felt compelled to circulate a draft letter in November 2021, which declared the chain supply of fuel previously common in the industry to be the exception rather than the rule as early as January 2022. When it became known that the VAT Committee of the EU Commission would take up the issue, the BMF withdrew the letter to await the outcome. Since 6 September, the corresponding guidelines of the VAT Committee have been available. These were derived from Working Paper 1067 of 5 July 2023.

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Direct claim: ECJ judgement "Michael Schütte" of 7 September 2023, C-453/22

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If the recipient of the supply cannot recover unduly paid VAT from the supplier, a direct claim against the tax office may be possible under certain circumstances, based on the ECJ's "Reemtsma" case law. Following a referral by the Münster Regional Tax Court, the ECJ has now dealt with further detailed questions - with a positive result for those affected.

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Economic integration in the case of fiscal unity - BFH ruling V R 28/20 of 11 May 2023 (published on 14 September 2023)

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The fiscal unity (or VAT group) for VAT purposes is a moving target - especially with regard to the economic integration that this requires. Legal practitioners have to rely on vague legal terms that make a reliable assessment difficult. The BFH (German Federal Fiscal Court) has now added some clarification here.

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Operating equipment: No splitting requirement in the case of uniform supply – BFH ruling V R 7/23 (V R 22/20) of 17 August 2023