Latest VAT News
Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
Cost of a new heating system does not entitle the landlord to deduct input VAT: BFH ruling from 7 December 2023, V R 15/21
The costs associated with the installation of a new heating system are not apportionable as operating costs. They can only justify a rent increase if they meet the requirements of an “energy-efficient refurbishment”. If the conditions are not met, the landlord is stuck with the costs. It would help the landlord if at least the input VAT deduction could be claimed for these expenses. In the opinion of the BFH, however, this is not permissible.
Incorrect VAT tax statement in invoices to final consumers – BMF letter dated 27 February 2024
In its judgement of 8 December 2022 (C-378/21), the ECJ ruled that VAT incorrectly stated on an invoice is not due if there is no risk of loss of tax revenue because the service was provided exclusively to final consumers. The contrary BFH (German Federal Fiscal Court) ruling from 13 December 2018 (V R 4/18) is therefore obsolete. The BMF (German Federal Ministry of Finance) recognises this and clarifies the scope of this ECJ ruling.
Input VAT apportionment: BMF letter dated 13 February 2024
The right to deduct input VAT only exists if an input supply is used for a taxed output turnover.
If an input supply cannot be directly and immediately allocated to a specific output turnover, but only to the business activity as a whole, an input VAT ratio must be calculated by comparing the taxed turnover to the total turnover. The Federal Ministry of Finance has issued several clarifications to the administrative guidelines of the German VAT Code (UStAE).
If an input supply cannot be directly and immediately allocated to a specific output turnover, but only to the business activity as a whole, an input VAT ratio must be calculated by comparing the taxed turnover to the total turnover. The Federal Ministry of Finance has issued several clarifications to the administrative guidelines of the German VAT Code (UStAE).
Device bonus for mobile phone contracts - BMF letter dated 23 January 2024
The German tax authorities amended the VAT Application Decree: If a mobile phone company concludes a contract with an intermediary in which it pays the intermediary a commission regardless of whether this intermediary provides a phone to its end customer, this is considered contractual decoupling and the full amount of the commission is then considered the remuneration for the intermediary service.
Supplies made free of charge and input VAT deduction – BMF circular letter dated 24 January 2024
The German Federal Ministry of Finance (BMF) aligns with the case law of the ECJ and the German Federal Fiscal Court (BFH): In certain cases, purchases that are only indirectly related to taxed output transactions are also eligible for an input VAT deduction.
Variable board remuneration is also not automatically taxable: ECJ ruling "TP" of 21 December 2023, C-288/22
On 13 June 2019, the ECJ ruled in the "IO" case (C-420/18) that the activities of a supervisory board member did not constitute self-employment and were therefore not subject to VAT because the board member did not bear any entrepreneurial risk. The Federal Ministry of Finance subsequently amended its application decree to the effect that fixed remuneration is not taxable, but variable remuneration is. According to the current ECJ judgement "TP", this is no longer tenable in such a generalised way.
Restaurant visits and catering will become expensive again as the reduced VAT rate expires on 31 December 2023
Lockdowns during the COVID-19 pandemic placed a heavy burden on the restaurant and catering businesses. To support the industry, a reduced VAT rate of 7% on restaurant and catering services (excluding beverages) was introduced on 1 July 2020 and extended several times. "I agreed to this in the knowledge that we will never abolish it again," said Federal Chancellor Scholz in 2021. However, the recent decision by the Federal Constitutional Court has left a shortfall of 60 billion euros in the federal budget, forcing the federal government to save money. As a result, the VAT rate reduction will now expire at the end of 2023.
Subscription gifts as an ancillary supply to a magazine subscription
ECJ judgement "Deco Proteste - Editores Lda" of 5 October 2023 (C-505/22)
Nowadays, magazine subscribers often receive a gift when subscribing, and this gift is often quite valuable. The question here is whether this constitutes a free of charge disposal of goods. If, on the other hand, there is a supply against payment, it must be clarified whether this is considered an independent supply or whether the subscription gift together with the supply of magazines is considered a uniform supply. This has an impact on the VAT rate.
Nowadays, magazine subscribers often receive a gift when subscribing, and this gift is often quite valuable. The question here is whether this constitutes a free of charge disposal of goods. If, on the other hand, there is a supply against payment, it must be clarified whether this is considered an independent supply or whether the subscription gift together with the supply of magazines is considered a uniform supply. This has an impact on the VAT rate.
BMF clarifies detailed questions on e-invoice in a letter dated 2 October 2023
VAT Committee publishes guidelines on fuel cards
After the ECJ ruling in the "Vega International" case, the BMF (German Federal Ministry of Finance) felt compelled to circulate a draft letter in November 2021, which declared the chain supply of fuel previously common in the industry to be the exception rather than the rule as early as January 2022. When it became known that the VAT Committee of the EU Commission would take up the issue, the BMF withdrew the letter to await the outcome. Since 6 September, the corresponding guidelines of the VAT Committee have been available. These were derived from Working Paper 1067 of 5 July 2023.