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