POLAND plans to publish list of active taxable persons and postpones introduction of the split-payment-system +++ ROMANIA postpones introduction of the split-payment-system +++ SWITZERLAND lowers VAT rates +++ HUNGARY is being criticized by the EU Commission for its rules on the EKAER system +++ GERMANY is being criticized by the European Commission for its implementation of the VAT refund procedure
The ECJ continues to soften the right to deduct VAT as seen in the legal case Iberdrola (C-132/16). This decision reignites the discussion about the question of the VAT treatment of development costs. The German Federal Fiscal Court’s case law and administrative opinion are, once again, on trial. Moreover, the decision may also be of general importance concerning VAT deduction.
In 2016, the Federal Fiscal Court had to decide, for the very first time, two cases concerning how supplies via consignment stocks are to be treated. The German Ministry of Finance has now taken on these decisions in the VAT Circular. The undifferentiated view of the Frankfurt Regional Tax Office’s Circular is now a thing of the past. Companies, be they suppliers or customers, who have not already become active after the publication of the Court’s decisions, should now examine whether their supplies, made via consignment stocks or other warehouses, are being handled correctly. This is relevant to all supplies from other EU member states as well as from non-EU countries and even for domestic supplies in Germany. Amendments can be made in a transitional phase until 31 December 2017.
The time has come: The EU Commission has given the go-ahead to implement the final VAT system. This is the beginning of a transition phase in which various changes are to come into force between 2018 and 2022. As a first step, EU-wide regulations for chain transactions and consignment stocks are on the agenda. With respect to intra-Community supplies, the VAT-ID no. shall become a material requirement for the VAT exemption and a uniform framework for documentary evidence shall be defined. The status of the certified taxpayer is to be introduced as a central element. Only companies having this status will be able to benefit from comprehensive simplification rules. As the coming months will bring fundamental changes, companies should start dealing with them now by drawing up a road map.
When the Union Customs Code entered into force, the customs authority started requesting the provision of the tax IDs of employees, executives and supervisory board members when reassessing existing authorizations and applications for the granting of new authorizations. Many companies, however, subsequently expressed doubts as regards the lawfulness of these requests. The Tax Court in Düsseldorf has referred this question to the ECJ. In the meantime, the customs authority has amended its questionnaire for the reassessment of and applications for authorizations.
In its judgments in legal cases C-616/15, C-326/15 and C-605/15, the ECJ ruled that Germany had violated the Union law on VAT exemption of cost sharing associations. According to national law, only associations in the form of so-called technology sharing groups of healthcare professionals are exempt pursuant to sec. 4 no. 14 letter d German VAT Act, and concern members belonging to the medical profession. However, according to the ECJ, all non-profit-making activities must benefit from the VAT exemption. The hopes of banks and insurance companies being in a position to also benefit have now effectively been shattered.
In a few days, on 30.09.2017, the deadline for filing input VAT refund applications for businesses resident in the EU for the year 2016 will expire. Just in time, with its letter of 22.09.2017, the Federal Ministry of Finance calls attention to small concessions and to a significant tightening of formal requirements. The intra-year exact temporal allocation of invoices is no longer of vital importance. However, a refund application is no longer considered as having been filed when specific information is missing. A subsequent amendment is not possible. The first application must be correct. The provisions regarding the attached invoices have also been tightened.
A few days before the start of the Oktoberfest, the Federal Fiscal Court published a decision on the applicable VAT rate for the sale of pretzels. The Court reconfirmed its current case law as regards the supply of restaurant services. The result: Where pretzels are sold by sellers with a vendor’s tray, a VAT rate of 7% applies. If the Brezn is sold by a beer tent operator, the standard VAT rate of 19% applies. Although the result gives no cause for complaint: From a Bavarian perspective, the explanation for the ruling is quite “scandalous” and requires a counterstatement. We wish you a pleasant Oktoberfest!
Service offerings below cost price often result in an excess of input VAT. At the end of 2016, the V. Senate of the German Federal Fiscal Court assumed that an emerging asymmetry would indicate that the person performing the supply was not acting as a taxable person (KMLZ-Newsletter 8/2017). In this case, VAT deduction would not be possible. A new judgment of the XI. Senate clarifies that, when checking if a person is acting as a taxable person, all aspects of the individual case must be taken into account in an overall assessment. The decision, regarding the public sector, might also ultimately impact on the private sector.
The Federal Fiscal Court has referred the question of the possible VAT exemption of driving schools to the ECJ (Ref. V R 38/16). Fortunately, the referred questions are comprehensive. If the ECJ affirms a VAT exemption, its scope of application will be expanded. Such a ruling may ultimately result in the supply of educational services, by other commercial schools and self-employed teachers, also being found to be VAT exempt. In order to benefit, to the optimum level from the VAT exemption, affected taxable persons need to react now.