Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
Strict stance on input VAT deduction in tax evasion cases - ECJ-ruling "HR" (C-108/20)
The fact that the deduction of input VAT can be denied if the taxable person is involved in tax evasion is not new. However, in its decision of 14 April 2021 (C-108/20 involving the "HR" case), the ECJ (European Court of Justice) once again emphasizes that a mere "should have known" with regard to tax evasion is sufficient at a preliminary stage. This ruling means that taxable persons have considerable due diligence obligations.
Article 3 of the Third Coronavirus Tax Relief Act – lower VAT rate for restaurant services has been extended
The German parliament, with the consent of the Federal Council, has passed the 3rd Act on the Implementation of Tax Relief Measures to combat the effects of the COVID-19 crisis (Third Coronavirus Tax Relief Act dated 10 March 2021). Article 3 extends the measures that apply a reduced VAT rate of seven per cent to restaurant and catering services (excluding the supply of beverages) from the 30 June 2021 deadline until 31 December 2022.
Reverse charge mechanism even if only one of several service recipients is an VAT taxable person - BFH-ruling V R 7/20
In its judgement dated 10 December 2020 (V R 7/20) and published on 20 May 2021, the BFH (Germany’s Federal Finance Court) decided that the reverse charge mechanism also applies if only one of several recipients of the same service is a VAT taxable person. The challenge in this particular case was first to determine who was the actual beneficiary: two individual people or a company. The case illustrates the importance of preparing a well-structured contract.
Webinar- Untangling the EU VAT e-commerce package: prepare your strategy now
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 ensure fair competition with non-European trader
Expansion of municipal roads - BFH-ruling "Mitteldeutsche Hartsteinindustrie" (XI R 26/29)
In its judgement of 16 December 2020 (XI R 26/20) in the "Mitteldeutsche Hartstein-Industrie" case, Germany’s Federal Court of Finance (Bundesfinanzhof, BFH) ruled that services performed in association with the unremunerated expansion of a public road by an entrepreneur entitle the entrepreneur to take input VAT deductions insofar as these are necessary for the company’s operation and that the benefit to the general public is, at most, incidental. A VAT-taxable free of charge supply does not exist if there is no threat of an untaxed end use. The BFH thus amends its case law, which previously denied the input VAT deduction.
No reverse charge for the mere supply of goods assembled on-site - BMF circular letter dated 1 October 2020
Under German VAT law, there are two types of supplies involving the provision of goods with installation, and each has its own VAT regulations. One type of supply involves the provision of assembled goods and the other involves the provision of work supplies. These differences are, in reality, often overlooked.The BMF (Germany’s Federal Ministry of Finance) has clarified this important distinction in the administrative guidelines with a circular letter dated 1 October 2020. As of 1 January 2021, treating supplies of assembled goods as work supplies is no longer be tolerated.
Verlängerung der Verjährungsfrist für Steuerhinterziehung - Gesetzesänderung zum 1. Januar 2021
Der Gesetzgeber hat zum 1. Januar 2021 die Verjährungsfrist für Steuerstraftaten in besonders schweren Fällen von zehn auf fünfzehn Jahre verlängert. Bei strafbefreienden Selbstanzeigen und Nacherklärungen, die strafbefreiende Wirkung entfalten sollen, verlängert sich dadurch der Berichtigungszeitraum. Die Änderung hat mittelbar auch Auswirkungen auf die steuerliche Festsetzungsverjährung.
Taxation of travel services according to Sec. 25 German VAT Code - BMF circular letter dated 29 March 2021
According to a circular letter from Germany’s Federal Ministry of Finance (BMF), dated 29 March 2021, the special provision of Section 25 of the German VAT Code will no longer apply to travel services provided by companies having their registered office in a third country and without a permanent establishment in the EU as of 1 January 2022. This decision is surprising because it has no basis in the wording of Section 25 of the German VAT Code.
Provision of company cars for private use - ECJ-ruling "QM" (C-288/19)
In its judgement in the "QM"-case dated 20 January 2021 (C-288/19), the ECJ has rejected the previous VAT taxation of the provision of cars to employees for personal use, insofar as the employee does not have to pay for the personal use. This opens up new options in cross-border cases.
Appropriate key for input VAT apportionment of mixed-use buildings - BFH ruling XI R 7/20
The BFH (Germany’s Federal Court of Finance) gives priority to the object-related turnover key when determining the input tax apportionment for mixed-use buildings (ruling dated 11 November 2020, XI R 7/20).
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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