Latest VAT News - Forvis Mazars

Equity measures for the flood disaster of July 2021; catastrophe decrees - BMF circular letter dated 23 July 2021

As a result of the recent disastrous flooding in several German states, the foundations of professional and personal existence literally lie in ruins for many people. Entrepreneurs were still suffering from the consequences of the COVID crisis, or had only just recovered from it, when massive volumes of water destroyed everything. The willingness to help is enormous. The tax administration supports those affected and helpers with various tax relief measures – amongst others for VAT.

VAT and insurance tax treatment of guarantee commitments - BMF circular letter dated 11 May 2021

On 14 November 2018 (XI R 16/17), Germany’s Federal Court of Finance (BFH) ruled that the guarantee commitment of a motor vehicle dealer against payment is not a dependent ancillary service to the supply of the vehicle, but an independent insurance service. In its letter of 11 May 2021, Germany’s Federal Ministry of Finance (BMF) adopts this case law in the VAT Application Decree (UStAE), clarifies the most important cases of application, and makes additions in its letter of 16 June 2021. We summarise the VAT aspects below.

Fictitious services of a commission agent VAT exempt without personal characteristic - BMF circular letter dated 9 June 2021

In its ruling of 25 April 2018 (XI R 16/16), Germany’s Federal Court of Finance (BFH) decided that in the case of a service commission, the personal VAT exemption for the services of theatres pursuant to Section 4 no. 20 letter a of the German VAT Code is also applicable to the fictitious service of the commission agent. Now, the Federal Ministry of Finance (BMF) is amending the VAT Application Decree (UStAE) - but only for this special VAT exemption.

Conclusions from a 2019 ECJ ruling on event admission entitlement to taxable persons - BMF circular letter dated 9 June 2021

In a letter dated 9 June 2021, the BMF amends the administrative guidelines for the German VAT Code on event services to taxable persons pursuant to Sec. 3a Subsec. 3 No. 5 of the German VAT Code. For these services to be taxable at the event location according to this special regulation, they now no longer have to be accessible to the general public. In doing so, the BMF intends to implement the ECJ ruling in the "Srf konsulterna AB" case of 13 March 2019 (C-647/17). It also clarifies that online seminars are not covered by Sec. 3a Subsec. 3 No. 5 of the German VAT Code.

Apartment rental with parking space is generally VAT exempt overall - BFH-ruling V R 41/19

In its ruling of 10 December 2020 (V R 41/19), unofficially published on 10 June 2021, the BFH (German Federal Court of Finance) ruled that if the landlord of apartments also rents out car parking spaces located in the same building complex, this is an ancillary service to the apartment rental and thus exempt from VAT. In doing so, it rejected the contrary view of the Thuringian Fiscal Court, which had unsettled the real estate industry in 2019. The Thuringia Fiscal Court wanted to interpret the term "building complex" more narrowly and attach further conditions to the uniform service.

Real estate without personnel equipment is not a permanent establishment - ECJ-ruling "Titanium Ltd" (C-931/19)

In its judgement of 3 June 2021 (C-931/19) in the "Titanium Ltd" case, the ECJ (European Court of Justice) ruled that a rented property is not a permanent establishment for the application of the reverse charge procedure if the owner of the property does not have its own staff for the performance of services in connection with the rental. This contradicts the previous practice of the German tax authorities.

Partnerships as integrated companies - ECJ-ruling "M-GmbH" (C-868/19)

The fact that partnerships generally qualify as integrated companies of a VAT group under Section 2 (2) No. 2 of the German VAT Code is no longer in dispute since the ECJ (European Court of Justice) ruling in the Larentia + Minerva and Marenave cases. However, the two VAT senates of the BFH (Germany’s Federal Court of Finance) have so far disagreed on whether this applies unconditionally. This dispute has now been decided by the ECJ in the"M-GmbH"-case (C-931/19)

Distance sales and B2C supplies of services - changes in the law as from 1 July 2021

If your company operates cross-border in the B2C (business to consumer) sector, there is a high probability that VAT reporting obligations will arise in other EU Member States as of 1 July 2021 due to the implementation of the eCommerce Directive. Are you affected?

Germany’s federal government puts application for VAT grouping on the agenda - package of measures to reduce bureaucracy

The German government plans to introduce 22 measures to reduce bureaucracy. Following the federal and state working group’s completion of the preliminary work, a process will be introduced according to which a VAT group does, if possible, not come into force without an application and a conformation from the tax authorities that the legal criteria are met.

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.