Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
No input VAT deduction from the purchase of luxury vehicles – BFH judgements V R 26/21 and V R 27/21
Luxury vehicles are a major annoyance for the tax authorities and are often classified as inappropriate. As a result, the input VAT deduction pursuant to § 15 (1a) UStG (German VAT Code) is not permitted because the expenses may not be taken into account for income tax purposes to reduce profits. In its two rulings of 8 September 2022, published on 12 January 2023, the BFH (German Federal Fiscal Court) already overturned the input VAT deduction at an earlier stage: The acquisition of the cars did not constitute an economic activity. This decision has implications for all the incidental transaction of a company.
No shifting the place of supply due to tax fraud – ECJ judgement C-641/21, 27 October 2022
When it comes to cases of tax evasion or fraud, the VAT Directive knows no mercy: if a trader participates in it, they are denied the tax exemptions and input VAT deduction, because no one is permitted to make fraudulent use of the VAT Directive. But what about cases where the place of supply is in another EU Member State according to the place-of-receipt principle and the recipient is liable for tax? For the supplier to be able to be sanctioned in such a situation, the Austrian Federal Fiscal Court considered suspending the place-of-receipt principle and taxing the supply in the supplier's Member State.
Input VAT deduction in the spouse model may be permissible – BFH ruling V R 29/20
Non-deductible input VAT is a nuisance, and creative approaches are sometimes used to remedy this. However, an input VAT deduction obtained this way often runs counter to the values of the VAT Directive and is therefore inadmissible; the ECJ came to this conclusion most recently with regard to the intermediary model (C-98/21). However, in its ruling of 29 September 2022, published on 12 January 2023, the BFH (Germany’s Federal Fiscal Court) approved a model in which an entrepreneur who was not entitled to deduct input VAT had used his wife as an intermediary.
VAT in the Digital Age: EU Commission publishes draft Directive
The VAT Directive must be adapted to the digital transformation of economic activities – the EU Commission has been working on this for a long time. On 8 December 2022, it presented a draft for an amended Directive that is intended to completely digitalise the VAT invoicing and reporting obligations, expand the previous regulations for the platform economy and avoid VAT registrations in other EU countries. Here, we present only the most important innovations. The proposed Directive will result in additional changes not outlined here.
Update: Instalment payments do not constitute partial supplies or uncollectability – BMF circular letter dated 14 December 2022
After the BFH (Federal Fiscal Court) implemented the corresponding ECJ ruling on the VAT treatment of instalment payments in its ruling of 31 January 2022 (V R 37/21), the BMF (Federal Ministry of Finance) is now amending the VAT application decree accordingly.
Refusal of input VAT deduction in case of fraud is not limited to the tax loss – ECJ decision of 24 November 2022, C-596/21
Anyone who knew, or should have known, that their turnover (purchase) was part of a tax evasion scheme is denied the input VAT deduction. The ECJ has stated that this also applies if the input VAT amount exceeds the evaded tax amount. Because an item’s price normally increases along the service chain, this scenario is likely to be rather rare. However, the case in this decision illustrates the ECJ's extremely strict stance on this issue.
Symbolic remuneration is insufficient for economic activity - BFH ruling XI R 35/19
Free of charge supplies are a problem for VAT purposes: If there is no case of taxable gratuitous transfer of value, the gratuitousness leads to the fact that there is no right to deduct input VAT for supplies purchased for this purpose. In practice, this situation is often avoided by agreeing on at least a small, possibly only symbolic remuneration – if the requirements of the minimum assessment basis are not met. The ECJ decision in the "Gemeente Borsele" case has severely restricted this alternative. The XIth Senate of the BFH (Federal Fiscal Court) is now also dealing with this.
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...
This website uses cookies.
Some of these cookies are necessary, while others help us analyse our traffic, serve advertising and deliver customised experiences for you.
For more information on the cookies we use, please refer to our Privacy Policy.
