Tax relief for aid to Ukraine - BMF circular letter dated 17 March 2022

In a letter dated 17 March 2022, the German Federal Ministry of Finance (BMF) regulates a variety of relief measures affecting those providing aid linked to the war in Ukraine. Some of these rulings may seem familiar because they are similar to those for the relief measures used to address the COVID-19 pandemic and last year’s flood disaster. The VAT-related rulings are briefly summarised below.

Further requirements may apply in some cases and these are covered in greater detail in the BMF letter itself, available using thislink.  

The most important VAT regulations covered in the BMF letter

  • Tax-privileged corporations in terms of Section 5 (1) No. 9 of the German Corporate Tax Act (KStG) may also classify the provision of personnel, premises, materials, etc. as a special-purpose operation within the meaning of Section 65 of the German Fiscal Code (AO) for VAT purposes and thus apply the reduced VAT rate under the conditions of Section 12 (2) No. 8a of the German VAT Act (UStG).
  • The same supplies are exempt from VAT as closely related transactions under the further conditions of Sec. 4 numbers 14, 16, 18, 23, and 25 of the UStG, insofar as they are performed between tax-privileged entities whose transactions are each exempt under the same provision.
  • The provision of goods, personnel, or living space for certain purposes free of charge does not entail taxation of a free transfer of value, nevertheless entitles the taxpayer to an input VAT deduction and does not require a correction pursuant to Section 15a UStG. The same applies to the change of use of premises of public sector entities.

(Dated: 4 April 2022)