GERMANY: COVID-19 VAT IMPLICATIONS

Apr 1, 2020 | COVID-19

GERMANY– Update 17th July

Guidance on temporary VAT rate reduction, through December 2020

The Ministry of Finance (BMF) issued guidance to implement reductions to the rates of value added tax (VAT) provided as relief measures in response to the coronavirus (COVID-19) pandemic. The VAT standard rate is reduced to 16% and the VAT “reduced rate” is further reduced to 5% for the period 1 July 2020 to 31 December 2020.

 Ministry of Finance guidance (30 June 2020) contains explanations and transitional arrangements about certain items such as:

  • Advance invoices
  • Long-term supplies
  • Partial supplies
  • Payment reductions
  • Redemption of price discounts and refund vouchers
  • Single-use vouchers
  • Refund of deposit amounts
  • Granting of annual bonuses
  • Annual rebates
  • VAT on telecommunications services
  • VAT on supplies of electricity, gas, water, heating and cooling as well as wastewater disposal
  • Passenger transport
  • Transactions in the hospitality industry
  • Exchange of items

If the supplying trader issues an invoice to another trader for a supply conducted after 30 June 2020 and before 1 August 2020, but showing the VAT rate applicable before 1 July 2020 (19% instead of 16%, or 7% instead of 5%) and has remitted this VAT amount, no objection will be raised in an effort to keep the matter simple if the trader does not correct the VAT amounts shown on these invoices. For practical purposes, during the transition period (in July 2020), a trader that is entitled to deduct input VAT will be granted an input VAT deduction on the basis of the VAT rate shown. For transactions on which the recipient of the supply owes VAT in accordance with section 13b UStG, this provision also applies for the VAT calculated by the recipient of the supply.

As a result of COVID-19 relief measures, restaurant and catering services (with the exception of the tax treatment of drinks) will be taxed at 5% from 1 July 2020 until 31 December 2020, and at 7% from 1 January 2021 until 30 June 2021.

Separate BMF guidance (2 July 2020) includes certain “no-objection rules” in instances for separating the total purchase price of so-called “combo offers” (such as a buffet all-inclusive offer) for food (reduced VAT rate) and for drinks (regular VAT rate). Also the guidance refers to the VAT treatment of business packages, in which supplies are partially not subject to reduced VAT.

Other recent VAT developments that may affect businesses in Germany include the following items:

  • Postponement of the e-commerce regulations until 1 July 2021
  • Hosting services in a computer center (CJEU, judgment of 2 July 2020 – case C-215/19)
  • Legal effects of an external audit (CJEU, judgment of 2 July 2020 – case C-835/18)
  • Distance sales regulation and double taxation (CJEU, judgment of 18 June 2020 – case C-276/18)
  • CJEU submission on VAT group (BFH, resolution of 7 May 2020, V R 40/19)

 

Source Credit – KPMG

 

  

GERMANY– Update 17th July

Majority of German SME associations against temporary VAT reduction: survey

BERLIN, July 15 (Xinhua) — Around two-thirds of the German associations of small and medium-sized enterprises (SME) negatively assessed the temporary reduction of value-added tax (VAT) in Germany and complained about additional work and costs, according to a member survey by umbrella association (ZGV) published on Wednesday.

Only 17 percent of member associations in the German SME sector expected a positive effect and economic stimulus from the VAT reduction from 19 to 16 percent, according to the survey.

“The VAT cut is well-intentioned but poorly implemented,” said Ludwig Veltmann, managing director of ZGV. The “extremely short time available for implementation” had resulted in a high administrative burden for SMEs. Stationary retailers, for example, had to change their pricing and cash register systems.

The majority of members also expected additional efforts and costs at the beginning of next year, when the temporary VAT reduction in Germany would run out, the survey found.

“The competitive disadvantage towards online trade is thus threatening to become even more intense in many sectors” in Germany, warned Veltmann.

The COVID-19 pandemic had already caused declining revenues in the second quarter (Q2) of 2020. According to the ZGV survey, almost 60 percent of its members had reported falling revenues.

However, German SMEs are becoming more confident about the future. Around 42 percent expected stable or even rising revenues in the coming months, according to the survey. In the first quarter, this figure had only been 18 percent.

Last week, the German government launched an aid program for SMEs to mitigate the economic effects of the COVID-19 crisis. For the three summer months until August, German SMEs could receive up to 150,000 euros (171,452 U.S. dollars) to cover fixed costs. Enditem

  

Source Credit – xinhuanet.com

 

GERMANY– Update 1st July

Reduction of VAT gives economy a boost of 0.2 percentage points

The temporary reduction in VAT will increase economic output this year by 0.2 percentage points or 6.5 billion euros. This was the result of calculations by the Ifo Institute for its new economic forecast, which Ifo President Clemens Fuest presented on June 29, 2020 to the Bundestag’s Budget Committee. The reduction from 19 to 16 percent from July 1 to the end of the year means tax losses of 20 billion euros.

The background is that the demand for consumer goods produced in Germany does not increase to the same extent as the tax cut. “It does not necessarily follow from this that the sales tax cut should be rejected as an economic policy measure. Supporting companies and easing the burden on consumers in the current crisis can be seen as desirable, even if consumption does not expand significantly, ”said Fuest. “Overall, expectations of stimulus programs should not be too high. In my opinion, it still makes sense and is necessary to support the economy in this critical situation with fiscal policy funds. ”

Of the entire stimulus package, 88 billion euros would be effective in 2020. This will increase economic output this year by around 30 billion euros or 0.9 percent of the gross domestic product. The companies will be relieved by 64 billion euros, the private households by 9.9 billion. The additional government spending amounts to 14 billion euros for 2020.

The head of the Ifo Center for Public Finance and Political Economy, Niklas Potrafke, told the committee: “It should be examined whether some measures can be canceled to reduce new borrowing.” The amortization plan for the supplementary budget envisages returning to the debt brake from 2023 and then repaying the same proportions annually within 20 years. “This amortization plan suggests that no recession is likely to cross the redemption plan within the next 20 years. It is not plausible, ”said Potrafke. Germany should return to balanced public budgets as soon as possible. It should be checked whether the debt brake could take effect again in 2022, especially if the economy picked up in the course of the coming year.

 

Source Credit – Datev

 

GERMANY– Update 29th June

Update on VAT rate reduction: Non-objection rule gives businesses one additional month for implementation of necessary changes

The Federal Ministry of Finance has published an amended draft of an application letter on the VAT rate reduction. This now contains the non-objection regulation in the B2B sector demanded by businesses, albeit for a limited time, it does not equate to the sought after full “low-tax phase”. Although the Ministry confirms that the application of an incorrect (too high) VAT rate will result in unduly charged VAT, the input VAT deduction should still be granted, in full, “for reasons of practicability” and an invoice correction should not be necessary for supplies rendered in July 2020. This gives businesses one additional month for the implementation of necessary changes.

 

Source Credit – kmlz.de

 

GERMANY– Update 25th June

Update on VAT rate reduction: Non-objection rule gives businesses one additional month for implementation of necessary changes

The Federal Ministry of Finance has published an amended draft of an application letter on the VAT rate reduction. This now contains the non-objection regulation in the B2B sector demanded by businesses, albeit for a limited time, it does not equate to the sought after full “low-tax phase”. Although the Ministry confirms that the application of an incorrect (too high) VAT rate will result in unduly charged VAT, the input VAT deduction should still be granted, in full, “for reasons of practicability” and an invoice correction should not be necessary for supplies rendered in July 2020. This gives businesses one additional month for the implementation of necessary changes.

 

Source Credit – kmlz.de

 

GERMANY– Update 23rd June

Temporary VAT reduction in Germany

As part of the stimulus package in connection with the corona pandemic, the value-added tax for the standard tax rate in Germany is to be reduced from 19% to 16% and the reduced tax rate from 7% to 5% in Germany from July 1st to December 31st 2020.

Source Credit – sap.com

 

GERMANY– Update 22nd June

Processual and technical challenges: Change in the German VAT rate in the covid-19 crisis recovery package

As a result of the covid-19 recovery package, changes in value-added tax are planned in Germany. This leads to risks for companies that can be countered by processes and ERP.

Proposed significant VAT-related changes in the covid-19 crisis recovery package of 3 June 2020

The economic consequences of the Covid-19 crisis are far-reaching. In order to manage them, the Grand Coalition has agreed to an unprecedented multi-billion economic support programme.

In addition to measures such as the children bonus for families with children and the relief on electricity costs for citizens and companies, the most prominent measure is changing of the German VAT rates. The VAT rates will be changed temporarily between 1 July 2020 and 31 December 2020 inclusive as follows (see Page 1 Paragraph (A) Item 1 of the Guideline of the German Federal Ministry of Finance (BMF) on the Coalition Committee of 03.06.2020):

  • Decreasing the standard VAT rate from the current 19% down to 16%; and
  • Decreasing the reduced VAT rate from the current 7% down to 5%.´

Insofar as this proposal is implemented (i.e. in the VAT law), companies will basically have to reduce by three respectively two percentage points the VAT payable to financial authorities on all supplies of goods and services which will take place between 30 June 2020 and 1 January 2021. This means a possibility of real savings for entrepreneurs and end customers (financial needs and thus relief at the last stage of commerce by approx. EUR 20 billion).

So far, there has been neither a draft law nor a BMF letter. As long as there are no BMF statements to the contrary, companies should probably refer to the BMF letter of 11.08.2006 (Az.IV A 5 – S 7210 – 23/06) regarding the change of the VAT rate from 16% to 19% on 1 January 2007.

Another change relating to VAT is planned for imports. The economic support programme shifts the due date for payment of the VAT on imports to Day 26 of the next month (see Page 2 Paragraph (A) Item 4 of the Guideline of the BMF on the Coalition Committee of 03.06.2020). This means that the measure is limited to the liquidity effect.

The measure is intended to give importers in Germany liquidity advantages and to harmonise the German regulations with the regulations on the VAT on imports in other EU countries. For example, some EU countries request reporting payment and deduction of the VAT on imports as part of a single VAT return, which enables avoiding a liquidity impact where the VAT amounts are deductible. Up to now, the VAT on imports is basically due in Germany at the time the merchandise is released for free circulation or with a delay in payment till Day 16 of the next month. The extension should probably be linked to the official customs payment deferral.

  • Implications for the professional practice: Changed VAT rates

With regard to the expected change of the VAT rates beginning on 1 July 2020, companies must take the first steps without undue delay because of the limited lead time.

Action is needed in particular in the following directions:

  • Relevant period cut-offs for the supplies made during the periods immediately before or after the cut-off dates. If, for example, a supply was made in June 2020, but the respective invoice will only be issued in July 2020, this supply should be invoiced in principle applying the ‘old’ VAT rate (of 19%).The only decisive factor is the point in time at which the service has been rendered – whereas the point in time when the contractual agreement was reached, the invoice was issued or the payment was received is generally not decisive for the purpose of the statutory taxation;
  • Application of the required adjustments, if any, to the VAT to be paid or the input tax deduction in the case of advance payment invoices and ensuring the correct issuance of the final invoices (the decisive factor is the point in time when the service subject to VAT was provided, not when the consideration was received (Section 27(1) Sentence 2 of the German VAT law [UStG]);
  • Treatment of ongoing services (such as rent, licenses), in particular with regard to input tax deduction and applicable final VAT rate, where for example annual invoices are issued. There can be room for manoeuvre under certain circumstances in terms of the tax timing for partial services;
  • Permanent invoices and contracts treated as an invoice must be adjusted accordingly where necessary because a higher VAT will be due otherwise;
  • Treatment of long-term projects, open orders or requests (collections) under framework contracts and the applicable VAT rates or treatment of those already closed or to be closed during the transition period and treatment of the VAT (for example, delimitation according to contracts with a gross or net price agreement, claims for compensation of the additional or reduced VAT charges according to Section 29 of the UStG);
  • Clarification regarding price adjustments or the possibility to adjust prices, in particular in B2C business with customers or in relation to sales to customers without input tax deduction;
  • Verification of the applicable input tax deduction. Even where, for example, a purchase invoice shows 19% VAT, but the underlying supply of goods or services was rendered for VAT purposes after 30 June 2020 and before 1 January 2021, the VAT would only be deductible at the applicable reduced VAT rate of 16%.

The above matters should be reviewed again in view of the upcoming change after 31 December 2020 back to the original VAT rates of respectively 19% or 7%.

Process-relating and technical challenges

In order to face the VAT rate changes in terms of processes and ERP set-up, we recommend clients to perform a direct check and initiate the follow-ing steps as required:

  • Implementation of new tax codes for the supplies of goods and services (i.e. 16% and 5% where applicable on the output side) and for the procurement of inputs (i.e. 16% and 5% where applicable for reg-ular input services, intra-community ac-quisitions, Section 13(b) of the UStG: In-put services and VAT on imports). It is not recommended to overwrite the previous tax key for 19% and 7% for reasons of traceability in later audits and possibly because of the new allocation of the tax codes that might be required for the VAT return or annual reporting codes;
  • Revision of settings for the electronic transmission of the UStVA files (mapping of tax codes to VAT return or annual dec-laration codes);
  • Adjustment of the invoice layout for sales transactions. The invoice layout for all sales made after 30 June 2020 must show the VAT rate accordingly reduced to 16% or 5% and the respective VAT amount;
  • Reconfiguration of the VAT determination in purchasing and sales modules (e.g. in the SAP modules MM and SD) and in par-ticular ensuring that the relevant tax con-ditions have been maintained and that the new VAT rates have been determined correctly for the period from the order creation or request processing to the re-ceipt of the invoice or invoice submission.
  • Update of travel expense/expense report processes and cash register systems as well as their booking processes;
  • Possibly, creation of new balance sheet accounts to delimit VAT sales tax and in-put tax;
  • Ensuring the period cut-offs in terms of the applicable VAT rates, for example, by means of guidelines/work instructions to departments and/or system-side (preven-tive) controls;
  • Review of open orders and earmarked or-ders, which were previously recorded in the system with the tax code and VAT rate of 19% or 7%. An automated run, for example, based on batch input portfolios or the like, helps avoid manual changes and ensures date-certain adjustments;
  • Testing of advance payments for the identification of occasions requiring ad-justment and for the implementation of respective corrections and system-side assurance of the correct issuance of final invoices, for example, by means of a re-spective system-side analysis (e.g. com-parison between the date of receipt of the advance payment and the service provi-sion date);
  • Ensuring the process-relating (system-side) check of all purchase invoices for the date of supply and the applicable VAT rate and ensuring in particular that invoices showing a too high VAT amount be subject to correction;
  • It must also be ensured when checking purchase invoices that invoices for the relevant catering services (meals) for the periods after 30 June 2020 and before 1 July 2021 show the applicable reduced VAT rate.

Changes in due date of the VAT on imports

The postponement of the deadline for payment of the VAT on imports to Day 26 of the next month can give additional liquidity to the company. Insofar as companies submit their VAT returns without making use of a long-term extension to Day 10 of the next month and have already deducted the VAT tax in the return, the payment of the VAT on imports in principle should have no adverse impact on liquidity.

Procedure and further information

It should be pointed out that immediate action is already needed due to the short lead time of only approx. 16 working days till the expected introduction of the change. The basic condition prerequisite for the identification of possible measures for your company is to create transparency about the existing transactions and critical situations.

 

Source Credit – roedl

 

GERMANY– Update 16th June

German Ministry of Finance announces more details regarding VAT rate cut

On 12 June 2020, the German Federal Cabinet adopted the first comprehensive measures of the economic stimulus package to address the economic consequences of the corona pandemic. These include in particular the temporary reduction of VAT in the second half of 2020: VAT will be reduced from 1 July 2020 to 31 December 2020. The regular tax rate will fall from 19 % to 16 %, the reduced tax rate from 7 % to 5 %.

To this end, the Federal Ministry of Finance has published a draft Circular of the Federal Ministry showing further details including the coordination with the supreme tax authorities of the federal states. The final outcome of the discussions remains to be seen. The latest draft available reflects the status as of 11 June 2020 and can be downloaded from the website of the Federal Ministry of Finance.

 

Source Credit – BMF

 

GERMANY– Update 16th June

German Ministry of Finance issues draft administrative guidelines on VAT rate changes

The German Ministry of Finance has published a draft version of its administrative guidelines on the VAT rate changes planned. The draft version reflects the status as of 11 June 2020.

 

Source Credit – BMF

 

GERMANY– Update 15th June

Germany approves VAT cut to counter COVID-19 impacts

Berlin, June 13 (IANS) The German government approved a cut in value-added tax from 19 to 16 percent for six months starting in July to counter the economic effects of the COVID-19 pandemic, the Ministry of Finance announced.

A lower value-added tax that applies to most food products and everyday consumer goods would be reduced from 7 to 5 per cent. The ministry stressed that in general, the application of the new rules would be made “as flexible and practical as possible” for companies, Xinhua news agency reported on Friday.

Furthermore, families would receive a one-off bonus of 300 euros (US $340) per child paid in two instalments in September and October. Families with children and single parents were particularly burdened by the restrictions during the COVID-19 pandemic, according to the ministry.

“With the economic stimulus package, we are providing strong impetus to lead our country out of the crisis and we are creating the confidence we need now,” said Finance Minister Olaf Scholz.

All measures of the government stimulus packages still require formal approval by parliament before coming into force. In order to implement the measures in time, special parliament sessions are scheduled for June 29.

 

Source Credit – menafn

 

GERMANY– Update 11th June

Value Added Tax (VAT): Significant changes in Germany as measures in the “corona crisis”

On May 28, 2020, the German government passed the coalition’s draft law on the implementation of tax relief measures to handle the corona crisis (the so-called “Corona-Steuerhilfegesetz”), which also includes changes in the Value Added Taxation, in this case a VAT rate reduction for the supply of food in place (restaurant services) for a limited period of one year; approval by the German parliament is already given just a few days after the draft, on June 5, 2020.

With even more far-reaching, significant changes in relation to VAT – and here as a big surprise – a corona economic stimulus package was announced by the German government on 3 June 2020. For a limited period of time, this already provides for the reduction of the regular VAT rate from 19 percent to 16 percent and of the reduced VAT rate from 7 percent to 5 percent for supplies of goods and services from 1 July 2020 to 31 December 2020.

Already implemented changes and planned changes in in the German VAT law as “economic and tax measures against Corona crises”

1. SUPPLIES OF FOOD IN PLACE AT A TEMPORARILY REDUCED VAT RATE

A reduced VAT rate is to apply for a limited period of one year to so-called restaurant supplies (supplies of prepared food in place), in this case specifically to the supply of food which is served and consumed on the spot, i.e. in restaurants, but also in company-owned canteens and canteens operated by an entrepreneur (employer).

This is based on the implementation of tax aid measures to overcome the corona crisis (so-called “Corona-Steuerhilfegesetz”), which the German parliament (printed matter 290/20) thus approved unchanged with regard to these VAT regulations on 5 June 2020, following the government’s draft bill.

The reduction of the VAT rate from currently 19 percent to 7 percent (possibly even to 5 percent as a result of the further Corona economic stimulus measures; see below) on the supply of food (restaurant and catering services) is planned for one year, i.e. for sales that are exported from 1 July 2020 up to and including 30 June 2021. This is intended to provide support primarily for the restaurant and catering area.

PRACTICAL ADVICE

The scheme is applicable to all entrepreneurs providing the beneficiary services, such as restaurants and catering businesses, bakeries, butchers, canteens and canteens run by public authorities or non-profit organisations.

The supply of alcoholic/non-alcoholic beverages remains excluded from the VAT rate reduction. Only the proportion of food in the restaurant service is eligible for the VAT reduction, not the proportion of drinks. A total price (e.g. in the case of a “Hamburger menu with drink”) is therefore to be divided accordingly, into a share for the favoured meals (7 percent, possibly 5 percent) and a share for beverages (19 percent, possibly 16 percent).

It should be noted that this VAT rate reduction will probably also apply to certain “canteen sales”, e.g. the self-operated canteen by an entrepreneur/employer. Also, the employer would probably be burdened with lower costs (reduced by 12 or 14 percentage points) on the input side if, for example, the caterer who runs the canteen for him as an independent leaseholder / operator were to send the employer statements of account regarding his subsidy for meals for his employees (“non-cash benefits to his personnel”), from which the employer cannot claim any input VAT deduction; in this case, he is simply and positively burdened with less non-deductible VAT.

This means that such a reduction is not only at first glance considerable for typical restaurant and catering businesses, but at second glance also for a large number of other entrepreneurs, here on the input and output side, in relation to expenses from input turnovers and to VAT owed and to be paid for restaurant services provided.

2. TEMPORARY REDUCTION OF GERMAN VAT RATES FROM 19 PERCENT TO 16 PERCENT AND FROM 7 PERCENT TO 5 PERCENT

As an economic stimulus and crisis management package, a Corona Economic Stimulus, Crisis Management and Future Development Package was announced by the German government on 3 June 2020. To that date and up to now only, the document “Fighting Corona Consequences, Securing Prosperity, Strengthening Sustainability” has been published on 15 pages as a result of the government.

In order to strengthen domestic demand in Germany, the VAT rate will be reduced from 19 percent to 16 percent and the reduced VAT rate from currently 7 percent to 5 percent for a limited period from July 1, 2020 to December 31, 2020, i.e. in principle for supplies of goods and services that are exported during this period.

PRACTICAL INFORMATION

This applies to all entrepreneurs in the trade with goods and services who, in Germany during this period generate taxable turnovers in Germany at all standard VAT rates, i.e. currently (still) 19 percent and 7 percent.

On 1 January 2007, the previously applicable, non-reduced VAT rate in Germany was increased from 16 percent to 19 percent. In practice, the then comprehensive letter of the German Federal Tax Authority dated 11 August 2006 (Ref. IV A 5 – S 7210 – 23/06) on the individual VAT accrual issues can now be applied analogously to the reduction of the tax rate during the year.

Important in practice are regularly the questions of delimitation in certain case variants, where, for example, recurring services are provided (permanent services, e.g. taxable tenancies, leasing) or supplies are only made in the period of the VAT rate reduction, but down payments for supplies and the corresponding invoices have already been made before, i.e. before 1 July 2020.

In addition, there is a further proposal for measures, here on German import VAT:

The due date of the import VAT – which is generally owed in the same amount as VAT rates when goods are imported in Germany – is postponed to the 26th of the following month.

This provides a liquidity effect for companies in Germany that are debtors of import VAT (e.g. in the case of Incoterm® DAP Delivered At Place, previously used DDU, agreed with the third country supplier). According to the government, it also enables companies in Germany to have a “level playing field” with many other EU member states.

GENERAL INFORMATION FOR PRACTICE

Due to the fact that VAT is levied on supplies of goods and services, every private consumer (non-entrepreneur) pays this tax when consuming in Germany. In principle, therefore, all consumers can benefit from a VAT rate reduction if entrepreneurs take this VAT rate reduction of three or two percentage points into account in their prices and also pass on that reduction to their customers. This is expected to boost the consumption in the country.

If prices are not reduced due to the VAT rate reduction accordingly, entrepreneurs can positively increase their own margins in this respect. Entrepreneurs who are not entitled to deduct input VAT and who purchase goods and services from other entrepreneurs should in any case notice a reduction in their costs on the input side.

If – as planned – both measures (draft Corona-Steuerhilfegesetz and proposal for a Corona Economic Stimulus Package) are passed by law before 1 July 2020, which is necessary to allow the VAT changes to come into effect from 1 July 2020, this will mean a considerable time bottleneck for companies with regard to VAT and considerable effort to implement all of this in the shortest possible time:

Accounting/ERP systems have to be adjusted to the new VAT rates accordingly, invoice layouts have to be amended accordingly, so that from 1 July 2020 – i.e. in just under 4 weeks – proper booking and invoicing of supplies can be carried out with the applicable VAT rate at that time point. Entrepreneurs today are generally dependent on the support of IT colleagues who make the

corresponding changes in the IT / ERP systems. As the proposal has not been passed yet, as a precautionary measure (also to handle VAT declaration in Germany) this should be considered and prepared in parallel already now.

It is important to avoid VAT risks that could potentially exist from 1 July 2020 as a result of an incorrect VAT rate statement, insofar as invoicing is still carried out at the old VAT rates, especially at the level of service receiving entrepreneurs who may only claim input tax in the amount of the legally owed VAT (i.e. in this case, incoming invoices should be carefully checked for the applicable tax rate at the relevant service date/period).

 

Source Credit – Rödl & Partner

 

GERMANY– Update 5th June

Standard VAT rate reduced from 19 to 16 percent and reduced tax rate will drop from 7 to 5 percent between July 1 and Dec 31, 2020

 

In order to boost the economy after the corona pandemic, Germany has put together an economic package worth billions. On 3 June 2020, the German parliament proposed to temporarily reduce the VAT rates from 1 July 2020 until 31 December 2020.

  • Standard rate is to be reduced from 19% to 16%.
  • Reduced rate is to be reduced from 7% to 5%

The classification from the standard 19% rate to the reduced 7% VAT rate for catering food services was announced by government earlier in May. The reduced rate will start 1 July 2020 and run until 1 July 2021. Take-away and delivered food is already liable to 7% VAT

 

Source Credit – Jbfisicalconsulting

 

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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