The coalition agreement has been sealed. The new federal government has made a real effort to modernise VAT (e-invoicing, reverse charge and import VAT) and, at the same time, to support activities for the common good (in-kind donations, supplies of educational services, inclusive businesses). It is just a pity that the long-awaited reform of the VAT group cannot be expected any time soon. However, we will keep trying.
The ECJ (case C-324/20) has ruled that, in the case of an instalment payment extending over five years, the respective VAT is chargeable at the time the supply of service is rendered. This decision differs from that made by the ECJ in the case of a player’s agent who was paid over three years for a supply of agency business services to a football club. However, the ECJ did not specify clear criteria for demarcation in this respect. In practice, it is recommended that full VAT be claimed from taxable persons entitled to input VAT deduction at the very outset of an instalment payment agreement.
In its recent decision of 21.10.2021 – C-80/20, Wilo Salmson, the ECJ clarifies that a taxable person must have an invoice in order to claim an input VAT refund. However, the court also makes it clear that the concept of an invoice is to be understood very broadly. The ECJ distances itself, consciously or not, from the minimum mandatory information for the acceptance of an invoice entitling the recipient of a supply to deduct input VAT as laid down by the German Federal Fiscal Court (most recently in the ruling of 12.03.2020 - V R 48/1) and the German Ministry of Finance (letter of 18.09.2020).
The German Ministry of Finance (BMF) recently provided a draft of a BMF Circular entitled “VAT assessment of transactions in the fuel card business” to industry associations with a request for comments to be provided by 4 November 2021. The BMF Circular is intended to take effect as early as 01.01.2022. If it comes into force in the currently planned version, the BMF will overturn the customary structure of fuel card transactions and follow the ECJ in the Vega International case: fuel card transactions will generally be considered credit services. This results in an urgent need for action for all parties involved.
For a long time, it has remained unclear, from a VAT perspective, as to how the funds collected by the collecting societies and then distributed to the publishers (so-called publisher’s share) is to be treated. The Federal Ministry of Finance’s letter of 14 October 2021 now provides clarity. Under certain circumstances, there may exist supplies of services, subject to VAT, between collecting societies and publishers.
In the legal case Dubrovin & Tröger GbR - Aquatics (C-373/19), the ECJ denied the VAT exemption for swimming lessons and thus confirmed its new definition of "school and university education". According to these standards, the scope of application of the VAT exemptions for educational services is considerably limited. As a result, part of the fiscal court case law will probably become obsolete quite soon. All education providers are affected by the decision and should now question the VAT assessment of their courses and events.
In practice, a number of VAT problems are associated with the development of charging infrastructure. The European Commission's VAT Committee has now once again addressed this issue. However, many relevant questions (e.g. on fuel cards or provision of electricity free of charge in the retail sector) remain unanswered, all resulting in the persistence of legal uncertainty in many areas of application.
Warning notices issued from 01.11.2021 onwards are subject to VAT. This is stated in the German Federal Ministry of Finance’s (BMF) recent letter dated 01.10.2021. In its 2016 decision (XI R 27/14) and its 2019 decision (XI R 1/17), the German Federal Fiscal Court assumed that a person issuing a warning notice provides a supply of services to the person being warned that is subject to VAT. The BMF now agrees with this view. For warning notices issued before 01.11.2021, the BMF letter contains a non-objection provision. Those issuing warning notices and their advisors must be prepared for this new administrative practice.
A roller coaster ride at the fun fair is cheaper than in the amusement park. The ECJ allows for different VAT rates of location-dependent carnivals in the form of amusement parks on the one hand and location-independent carnivals on the other. It confirms the fundamental compatibility of this German taxation practice with EU law, provided that the principle of neutrality is observed, i.e. equal services are treated equally.
The German Federal Fiscal Court has submitted a question to the ECJ that is also of central importance for the deduction of input VAT, namely: What is the procedure in the case of leasing with simultaneous provision of operating equipment? Is this a single (VAT-exempt) rental service, or is there a general requirement to split the service up? The practice hopes for more legal certainty on this issue following clarification by the ECJ. To date, the correct assessment under tax law has been similar to playing the lottery. The German Federal Fiscal Court hopes that clear guidance from the ECJ will make it easier and faster to clarify many individual issues in practice.
