Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
Reimbursement of expenses for certain written warnings will be subject to VAT - BFH rulings XI R 27/14 and XI R 1/17
On 21 December 2016 (XI R 27/14) and 13 February 2019 (XI R 1/17), the Federal Fiscal Court (BFH) ruled that the reimbursed expenses paid by a person issued a written warning for copyright or competition law infringement is a service charge that is subject to VAT. The BMF also adopted this view in its letter dated 1 October 2021 and clarified some specific questions. The key details are summarised below.
Update: VAT and insurance tax treatment of guarantee commitments - BMF circular lettter dated 18 October 2021
Germany’s Federal Ministry of Finance (BMF) is once again extending the transitional rule for the treatment of paid guarantee commitments as an insurance service in a circular letter dated 18 October 2021. This gives entrepreneurs more time and flexibility to adapt to the amended Federal Fiscal Court (BFH) case law.
Reverse charge procedure for VAT groups as recipients of supplies - BMF circular letter dated 27 September 2022
In its ruling of 23 July 2020 (V R 32/19), the Federal Fiscal Court (Bundesfinanzhof, BFH) issued a decision in a property development case: If the recipient of construction work supply is part of a VAT group, the applicability of the reverse charge procedure is dependent on the external supplies of the VAT group. In a letter dated 27 September 2021, the German Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) subsequently amended the VAT Application Decree (Umsatzsteuer-Anwendungserlass, UStAE) and extended this legal principle beyond property development cases to other areas in which the reverse charge procedure is applied in VAT group cases.
Management fee for venture capital funds has been exempt from VAT since 1 July 2021
The German Fund Location Act extended Sec. 4 no. 8 h of the German VAT Code with effect from 1 July 2021. As a result, the management of venture capital funds is also exempt from VAT. This has significant implications for capital management companies.
Fraud warning: False VAT ID letters in circulation
Germany’s Federal Central Tax Office (BZSt) warns of official-looking letters or emails offering to issue, register, record or publish a VAT ID for a fee.
Time of input VAT deduction in case of taxation based on accruals - Opinion Advovate General "Kollaustraße" (C-9/20)
On 10 December 2019, the Hamburg Finance Court (1 K 337/17) decided to ask the European Court of Justice (ECJ) for a preliminary ruling on when the right to deduct input VAT arises for recipients if suppliers make use of taxation based on payments received. In his opinion (9 September 2021, C-9/19), the Advocate General proposes that the ECJ declare the relevant German statutory provision incompatible with the VAT Directive.
Is the VAT refund procedure a way out for foreign landlords? - ECJ-ruling "Titanium" C-931/19
In its judgement of 3 June 2021 (C-931/19) in the "Titanium" case, the ECJ ruled that a rented property is not a fixed establishment for the application of the reverse charge procedure if the owner of the property does not have its own staff in that country for the performance of the rental service in question (as we reported). This prevents many entities from registering for VAT purposes and offsetting the input VAT via the preliminary VAT returns. The tax authorities still see this differently. How should companies deal with this uncertainty?
Different VAT taxation of elements of a single supply - application for preliminary ruling by the ECJ C-516/21
On 26 May 2021, published on 19 August 2021 (V R 22/20), the Federal Fiscal Court (Bundesfinanzhof, BFH) decided to refer to the European Court of Justice (ECJ C-516/21) the question of whether permanently installed equipment and machinery is exempt from VAT even if the leasing of such equipment and machinery together with the leasing of real estate constitutes a single supply. The ECJ's answer will also have implications for cases where different VAT rates apply to elements of a single supply.
Amendment of the German VAT Application Decree on supervisory board remuneration - BMF circular letter dated 8 July 2021
In 2019, the European Court of Justice (ECJ) ruling of 13 June (C-420/18) in the “IO” case had caused a stir because, contrary to the practice of the German tax authorities, the ECJ had judged the economic activity of a supervisory board member to not be independent and thus not VAT-taxable. The German Federal Fiscal Court (BFH) followed this by also denying taxability for a case in which the supervisory board member did not bear any economic risk (ruling of 27 November 2019, V R 23/19). The German Federal Ministry of Finance (BMF), which had previously assumed taxability without exception, is now adapting Sections 2.2. and 18.6. para. 1 of the German VAT Application Decree (UStAE) to the case law in a letter dated 8 July 2021.
COVID-19: temporary VAT exemption for procurements by the EU Commission - amendment of the VAT Directive as per 15 July 2021
On 15 July 2021, the "Council Directive (EU) 2021/1159 of 13 July 2021 amending Directive 2006/112/EC as regards temporary exemptions on importations and on certain supplies, in response to the COVID-19 pandemic" entered into force. If the EU Commission centrally procures goods or services to respond to the COVID-19 pandemic and passes them on free of charge, they should not be subject to VAT.
10 June | 16:00 – 18:00 CET
The e-commerce sector has been growing rapidly in the last few years, entirely changing the way business is transacted. This growth comes with new rules and regulations, including the new VAT rules for online cross-border sales of goods and services. Set to come into effect on 1 July 2021, these new rules have the purpose of strengthening the European internal market and...
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