Latest VAT News
Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
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.
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.