Latest VAT News - Forvis Mazars

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.

Input tax deduction of a management holding company: "intermediary model" may be on the brink - ECJ case C-98/21

On 23 September 2020 (XI R 22/18), the German Federal Fiscal Court (BFH) decided to submit a request for a preliminary ruling to the European Court of Justice on the input VAT deduction of a management holding company (pending there, reference: C-98/21). The case concerned an "intermediary model" in which a company not entitled to a full input VAT deduction interposed a management holding company when purchasing services, which then claimed the input VAT deduction from these input services. The BFH has now granted a stay of execution in another case in view of this request for preliminary ruling (request of 30 March 2021, published on 5 August 2021, V B 63/20).

Sale of a property leased to and subleased by the buyer can be a transfer of a totality of assets - BFH ruling XI R 8/19

In its ruling of 24 February 2021 (XI R 8/19), published on 22 July 2021, the BFH decided the following: If a taxable person sells a property to the previous tenant of this property who had partially sublet it prior to the sale, this transfer of a totality of assets is not subject to VAT in this respect if the previous tenant continues to rent out this part of the property after the sale. It is interesting to distinguish this from an earlier, similar case.