GERMANY: COVID-19 VAT IMPLICATIONS

Apr 1, 2020 | COVID-19

GERMANY/FRANCE – Update 27th May

COVID-19 Pandemic: Emergency Tax Measure

Germany and France Sign Agreement on Taxation of Frontier Workers Germany and France signed an agreement on the taxation of frontier workers who are currently e-working at home due to the COVID-19 pandemic.

The mutual agreement stipulates that, for purposes of the application of Article 13(1) of the France – Germany Income and Capital Tax Agreement (1959) (as amended through 2015), days spent working from home due to COVID-19 pandemic measures will be deemed to be spent in the state where the frontier workers would have carried out the work without the current COVID-19 pandemic measures.

This rule will not be applicable to working days which would have been spent in the home office anyway or in third countries, in particular if working from home is part of the respective contractual labour agreements. The mutual agreement further stipulates that concerned frontier workers intending to make use of the mutual agreement are obliged to collect relevant evidence, i.e. a statement by the employer about the days spent in home office due to the COVID-19 pandemic. The fiction provided for by the mutual agreement will only be effective to the extent that the relevant employment remuneration concerning the days spent in a home office are effectively taxed by the work state where the work would have been carried out without the current COVID-19 pandemic measures.

Frontier workers making use of the mutual agreement thus consent to taxation of the respective employment remuneration in the work state. Such employment remuneration is deemed to have been effectively taxed if the amount is being taken into account when determining the taxable basis.

The mutual agreement further notes that the application of the frontier worker provision contained in Article 13(5) of the treaty is not affected by the current COVID-19 pandemic measures due to a previous mutual agreement signed in 2006. In addition, the competent authorities agree that, for purposes of interpreting the treaty, payments under statutory social insurance schemes, e.g. the payment of reduced hours compensation benefit (Kurzarbeitergeld) in Germany and similar payments in France (chômage partiel), shall be taxable only in the state of residence of the recipient.

The mutual agreement will be applicable to working days during the period between 11 March 2020 and 31 May 2020 and is automatically extended until the end of the following calendar month, provided that the agreement is not terminated by one of the competent authorities at least 1 week before the end of a given following calendar month. The agreement was signed on 13 May 2020 (IV B 3- S 1301-FRA/19/10018:007, DOK 2020/ 0503105) and entered into force on 14 May 2020.

 

Source Credit – IBFD

 

GERMANY – Update 26th May

Delay of 2019 13th Directive reclaims deadline for businesses from 30 June to 30 September 2020

Germany have become the latest EU member state to push back the 2019 13th Directive reclaims deadline for businesses from 30 June to 30 September 2020. This is as a result of the COVID-19 pandemic.

The deadline is for non-EU businesses to reclaim Value Added Tax incurred within the EU (including the UK during its Brexit transition period).

The deadline change is not automatic, however. Applicants will have to provide documentary proof of a significant impact on the business to justify the delay.

Over 15 EU member states have moved this deadline for non-EU businesses to reclaim VAT incurred on business-related expenses. These may include: hotels; venue expenses; other travel; entertainment; local advertising costs. Switzerland has not extended its deadline.

 

Source Credit – Richard Asquith – (Avalara)

 

GERMANY – Update 25th May

VAT relief included in draft legislation (COVID-19)

Measures being proposed in a draft legislation are intended to provide certain tax relief measures and enhanced liquidity in response to the coronavirus (COVID-19) pandemic.

 The draft law includes two measures specifically concerning value added tax (VAT) relief: 

  • First, the VAT rate for restaurant and catering services provided after 30 June 2020 and before 1 July 2021 (with the exception for drinks) would be reduced from 19% to 7%.
  • Second, the current transitional regulations with regard to § 2b German VAT Law (concerning new rules for certain “legal entities under public law”) to handle the COVID-19 pandemic would be extended until 31 December 2022.

 In addition, a new § 27 (22a) UStG would allow flexibility in light of the COVID-19 implications and specifically would concern the timing of the transition rule application, given that a small number of “legal entities under public law” submitted a declaration before 2016 and have already carried out the necessary adjustment for 1 January 2021; these entities could begin with the application of § 2b UStG by making a corresponding “retraction” in 2020. In contrast, other “legal entities under public law” would be granted up to two more years for the adjustment period.

 

Source Credit – KPMG

 

GERMANY – Update 11th May

Reduced VAT Rate for the Restaurant Industry / Extension of the Transitional Period for sec 2b for the Public Sector

By means of the Corona Tax Subsidy Act, the legislator intends to relieve the restaurant industry and the public sector from the burden of VAT. To this end, the reduced VAT rate of 7 % is to be applied to the supply of restaurant and catering services provided in the period from 1 July 2020 to 30 June 2021. The transitional period in accordance with sec. 27 para. 22 of the German VAT Act for legal entities under public law as regards the application of sec. 2b of the German VAT Act will be extended by a further two years until 31 December 2022.

 

Source Credit – KMLZ

 

GERMANY – Update 7th May

VAT rate changes on German restaurant services

German VAT rates on restaurant and catering services will be reduced temporarily to help businesses affected by Coronavirus.

As for of the initiatives to support industries that are widely impacted by the Coronavirus effects on consumption, Germany announced a reduction of VAT rates on restaurant and catering services from 19% to 7%.

These changes will be temporary. They will take effect only from 1 July 2020 to 30 June 2021.

Conference organizers and other business customers should ensure that the changes are correctly implemented in invoices received to avoid having issues with VAT deduction when such invoices are reported in their periodic VAT return.

VAT rate changes in the EU due to Covid-19

VAT rates changes are being used in many European countries as a temporary (or long-term) measure to reduce the negative impact of Coronavirus. Estonia, UK and Spain all announced this week a reduction of VAT rates on e-books and electronic publications. Spain also reduced rates on certain sanitary products used to prevent infection from the disease.

 

Source Credit – Marosa

 

GERMANY – Update 6th May

Extending Reduced VAT Rate to Restaurant and Catering Services from 19% to 7% from 1 July until 1 July 2021

Germany has reduced VAT catering food services from 19% to 7%. The classification from the standard rate to reduced rate will apply from 1 July until 1 July 2021. Take-away and delivered food is already liable to 7% VAT.

Source Credit – Richard Asquith (Avalara)

GERMANY – Update 5th May

Announcement from the Federal Ministry of Finance

On 3 April 2020, the Federal Ministry of Finance published a notice on its website regarding the tax impacts of COVID 19 lockdown on cross-border commuters (e.g situations, where under a double tax treaty agreement (“DTA”), exceeding a certain number of days on which the actual country of work is not visited can lead to a partial change in the right of taxation).

Under certain DTAs, such as Luxembourg, the Netherlands and Austria, an increased number of days working remotely from home can lead to a change in the distribution of taxation rights and thus to a change in the tax situation of the employees concerned.

 

Source Credit – PWC

 

 GERMANY – Update 28th April

Catering food services from 19% to 7% from 1 July until 1 July 2021

 Germany has reduced VAT catering food services from 19% to 7%. The classification from the standard rate to reduced rate will apply from 1 July until 1 July 2021. Take-away and delivered food is already liable to 7% VAT.

 

Source Credit – Richard Asquith – (Avalara)

 

GERMANY – Update 17th April

The German Tax Authority has announced that there is no postponement for the VAT return filing or payment dates, however businesses may apply for a payment deferral if the payment would lead to significant hardship. If a payment is made late, it is possible to apply for a waiver of penalties that are imposed as long as the business can demonstrate that the delay was directly due to Covid-19 and its impact on the business.

 

Source Credit – Accordance VAT

 

GERMANY – Update 9th April

COVID-19: Hessian Ministry of Finance: Options to delay VAT declarations and related payments, No VAT on donations for disinfect and masks/protective wear

Options to delay declarations and related payments that were due in April and May for impacted companies up to 2 months.

For monthly or quarterly advance VAT returns to be submitted in April 2020 and May 2020, the following applies with immediate effect:

“All taxable persons affected by the Corona crisis will be granted, upon (informal) request, a two-month extension of the deadline for submission and payment of VAT advance returns to be submitted by 10 April 2020 (or 14 April 2020 due to public holidays) and 10 May 2020. This means that the VAT advance returns to be submitted by 10 or 14 April 2020 can only be submitted and paid on 10 June 2020 upon application. For 10 May 2020, the deadline for submission and payment will be postponed to 10 July 2020 upon application”

Source credit – Hesseian Ministry of Finance

GERMANY – Update 9th April

Germany VAT payment holiday till Dec 2020 for coronavirus outbreak

Update, 8 April: the 2019 annual VAT return deadline is postponed until 31 May 2020.

22 March: Germany has updated its VAT deferment offer during the COVID-19 crisis.

The Germany Ministry of Finance, Bundesfinanzministerium (BMF), has announced that businesses may apply for a delay on Value Added Tax payments until 31 December 2020. Companies need only provide basic evidence of challenging trading circumstances to gain approval for a postponement.

A further delay beyond 2020 may also be requested, although the evidence hurdle is higher.

The BMF measure has been co-ordinated with the local states tax offices. These offices collect taxes on behalf of the federal government.
The deferment offer applies not just to VAT, but also personal and corporate income taxes.

 

Source Credit – Richard Asquith (Avalara)

GERMANY – update 7th April

Germany Publishes Overview of Tax Measures to Assist all Businesses Affected by the COVID-19 Pandemic

The German Ministry of Finance has published an overview of tax measures to assist all businesses affected by the coronavirus (COVID-19) pandemic, including payment deferral and waiver of penalties.

Businesses will receive tax-related assistance in order to boost their liquidity during the coronavirus pandemic. In coordination with the highest revenue authorities of the German Länder, the Federal Ministry of Finance has adopted a circular specifying tax relief measures to support affected taxpayers.

Tax payment deferrals: If, as a result of the economic effects caused by the coronavirus pandemic, businesses cannot afford to pay taxes that are due in 2020, they can apply for temporary, interest-free deferrals of these payments. Businesses can file applications with their respective tax offices until 31 December 2020.

The approval of deferrals will not be subject to strict conditions. Businesses will be required to explain that they are directly affected, but they will not have to document in detail the amount of economic damage. This will support taxpayers’ liquidity, because the timing of tax payments will be delayed. This measure applies to income tax, corporation tax and VAT.

Adjustments to tax prepayments: In addition, companies, self-employed persons and freelancers can request adjustments to the amount of their income tax prepayments and corporation tax prepayments. The same applies to the base tax amount used to determine trade tax prepayments. They can do this by filing an application with their respective tax office. As soon as it becomes clear that a taxpayer’s income in the current year will be lower than expected prior to the coronavirus pandemic, tax prepayments will be reduced in a swift and straightforward manner. This will boost their liquidity.

Suspension of enforcement measures: Measures to enforce the payment of overdue taxes will be waived through the end of 2020. Late-payment penalties that fall due under the law during this period will be waived as well. This applies to income tax, corporation tax and VAT.

The customs administration, which administers import VAT, energy duty and aviation tax, will grant the same relief. This relief also applies to insurance tax and to VAT administered by the Federal Central Tax Office.

Facilitation of disinfectant production: The demand for disinfectants has surged dramatically since the outbreak of the coronavirus epidemic. The Federal Ministry of Finance has adopted a measure that now permits pharmacies to use alcohol tax-free for the purpose of producing disinfectants.

These tax-related assistance measures form part of a multibillion-euro protective shield for Germany.

 

Source credit – Orbitax

GERMANY – updated 31st March

  • Taxable persons directly and significantly affected by the impact of COVID-19: o may submit applications for deferral of taxes already due or becoming due up to 31 December 2020 which are administered by the state financial authorities on behalf of the federal government (including income tax, corporation tax, solidarity surcharge and VAT; not included payroll tax
  • with the exception of lump-sum payroll tax and withholding tax).
    • may submit applications for the adjustment of prepayments on income and corporation tax; interest on deferral can be waived.
    • shall not be subject to enforcement for periods up to and including 31 December 2020; this should apply to all taxes in arrears or due by that date and enumerated above.
    • shall not be subject to late payment penalties charged within the period from 19 March 2020 to 31 December 2020.
    • may also apply for a reduction of the trade tax base for trade tax prepayment purposes until 31 December 2020.
  • The majority of the “Länder” has published application forms regarding the above mentioned measures. The scope of the announcements may vary.

Source Link here

GERMANY

There has not been an announcement to any changes in regard to the VAT filing deadline in Germany, due to the coronavirus situation. The deadline is still the 10th of the following month respectively the 10th of the second following month in case the extension of deadline is in place.
Regarding the payments of VAT.

There is currently also no possibility to postpone those VAT payments and therefore needs to be paid until the 10th of the following month respectively until the 10th of the second following month in case the extension of deadline is in place. The German tax authority justifies this with the explanation that the VAT is borne by the end customer and is only “collected” by businesses. This is because the VAT is collected as part of the remuneration and is subject to fiduciary administration until it is paid to the tax authority. 

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