Latest VAT News
Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
Status as taxable person in loss-making activities – ECJ judgements "Gmina O." and "Gmina L." (C-612/21 and C-616/21)
In the "Gemeente Borsele" case, the ECJ had already ruled that purely symbolic charges with very little cost recovery were not a remuneration, but rather a type of administrative fee. Thus, there is also no right to deduct input VAT.
VAT grouping: BFH refers internal supplies to the ECJ again and changes jurisdiction on voting rights
After the ECJ had ruled on the two ECJ cases "Finanzamt T" and "Norddeutsche Diakonie", experts breathed a sigh of relief because they no longer had to fear that the ECJ might reject the German concept of VAT grouping altogether. However, the ECJ did not confirm the non-taxability of internal supplies as clearly as they had wished. The V. Senate of the BFH (Federal Financial Court in Germany) is therefore referring the "Finanzamt T" case to the ECJ for a second time. The XI. Senate, on the other hand, is publishing its follow-up decision in the "Norddeutsche Diakonie" case and adapting to the ECJ case law.
Zero VAT rate for photovoltaic systems
No VAT-taxable supply when the costs serve one's own interests – BFH decision XI R 12/20
Companies with great market power, in particular, occasionally pass on a certain portion of their own costs to their suppliers when purchasing goods. This raises the question of whether they thereby provide a supply to their suppliers, which must be invoiced accordingly. In its current ruling, the BFH (Federal Fiscal Court in Germany) shows that this depends on whether the costs of the supply are in the initial supplier's own interest. Whether this is the case depends on the facts of the individual case.
Platform Tax Transparency Act (PStTG) and DAC-7 Directive – Significance for VAT
Digital platforms on which entrepreneurs from all over the world can process their sales have become significantly more important. This poses a real challenge for the tax authorities, and a considerable portion of this turnover is probably not being taxed at the moment. This is also because there are still problems in the way the tax authorities of different EU Member States share information. The EU has addressed this issue with the DAC-7 Directive, which was implemented in Germany via the Platform Tax Transparency Act (PStTG), which came into force on 1 January 2023. In a letter dated 2 February 2023, the German Federal Ministry of Finance (BMF) commented on some issues needing clarification. Here, we shed some light on how these relate to VAT obligations.
Forschungseinrichtungen – Finanzverwaltung positioniert sich zum Umfang des Unternehmens und des Vorsteuerabzugs
16.02.2023. Bisher war es regelmäßig wesentlicher Diskussionspunkt im Rahmen von Betriebsprüfungen und der Erstellung von Steuerklärungen, inwieweit Forschungseinrichtungen umsatzsteuerliche Unternehmer und damit auch zum Vorsteuerabzug berechtigt sind.
No input VAT deduction from the purchase of luxury vehicles – BFH judgements V R 26/21 and V R 27/21
Luxury vehicles are a major annoyance for the tax authorities and are often classified as inappropriate. As a result, the input VAT deduction pursuant to § 15 (1a) UStG (German VAT Code) is not permitted because the expenses may not be taken into account for income tax purposes to reduce profits. In its two rulings of 8 September 2022, published on 12 January 2023, the BFH (German Federal Fiscal Court) already overturned the input VAT deduction at an earlier stage: The acquisition of the cars did not constitute an economic activity. This decision has implications for all the incidental transaction of a company.
No shifting the place of supply due to tax fraud – ECJ judgement C-641/21, 27 October 2022
When it comes to cases of tax evasion or fraud, the VAT Directive knows no mercy: if a trader participates in it, they are denied the tax exemptions and input VAT deduction, because no one is permitted to make fraudulent use of the VAT Directive. But what about cases where the place of supply is in another EU Member State according to the place-of-receipt principle and the recipient is liable for tax? For the supplier to be able to be sanctioned in such a situation, the Austrian Federal Fiscal Court considered suspending the place-of-receipt principle and taxing the supply in the supplier's Member State.
Input VAT deduction in the spouse model may be permissible – BFH ruling V R 29/20
Non-deductible input VAT is a nuisance, and creative approaches are sometimes used to remedy this. However, an input VAT deduction obtained this way often runs counter to the values of the VAT Directive and is therefore inadmissible; the ECJ came to this conclusion most recently with regard to the intermediary model (C-98/21). However, in its ruling of 29 September 2022, published on 12 January 2023, the BFH (Germany’s Federal Fiscal Court) approved a model in which an entrepreneur who was not entitled to deduct input VAT had used his wife as an intermediary.