Since 4 December 2018, the Member States have been free to apply the reduced VAT rate to e-books. In our opinion, applying the reduced VAT rate should now be considered mandatory. E-book suppliers would, in particular, benefit. If they have agreed upon gross prices with their customers, the reduced VAT rate increases their margin. Taxable persons, such as libraries, universities or other public institutions, which are often not entitled to input VAT deduction for the purchase of electronic publications from abroad but have to pay VAT (reverse charge scheme), would also benefit. However, the changed legal situation can pose new VAT challenges e.g. in instances where the various contents of databases are to be treated differently.
On 4 December 2018, the ECOFIN adopted the so-called Quick Fixes, to oper-ate as of 1 January 2020. In the KMLZ Newsletter 01/2019, we introduced the new regulations for intra-Community supplies. This newsletter follows on from the changes to the documentary evidence that will also come into force on 1 January 2020. In future, sec 45a para 1 of the Council Implementing Regula-tion will contain a presumption rule in favour of the taxable person. The respec-tive tax authorities may rebut the presumption. In principle, the new regulation applies uniformly and directly throughout the EU.
On 4 December 2018, the ECOFIN adopted the so-called Quick Fixes, to operate as of 1 January 2020. The Quick Fix on intra-Community supplies of goods sees the purchaser’s VAT-ID-No. of another Member State than the Member State of departure as being a mandatory requirement for zero-rating. This will also apply to intra-Community transfers of goods, which are deemed to be supplies of goods. However, the VAT Directive does not stipulate input VAT deduction from intra-Community transfers of goods subject to VAT. Therefore, many business transactions, entered into in accordance with Art. 17 para 2 of the VAT Directive, which are usually outside the scope of VAT, are now threat-ened with a definitive VAT burden, if the requirements of the Article can no longer be met.
Some people might use their free time over Christmas and the turn of the year to go to the mountains or perhaps book their next summer holiday. The man on the street will not worry about the VAT. However, those interested in VAT might ask themselves whether their travel agency charges them VAT at the standard rate or at the reduced rate, or whether the margin scheme applies. In any case, the ECJ recently dealt with these and other exciting issues concerning the travel industry in the legal case Alpenchalets Resort and Skarpa Travel.
Until now, the BGH had held the view that input VAT amounts must, in general, not be taken into account when assessing VAT evasions due to the so-called “prohibition of compensation”. Since balancing was thus not permitted, the perpetrator’s claim for reimbursement against the tax office, on the basis of justified input VAT claims, could not eliminate the offence of tax evasion. The BGH has now abandoned the across-the-board application of this case law in favour of a balancing of input VAT and value-added tax, in certain cases.
The British Treasury’s “Making Tax Digital“ project introduces the digital filing of VAT returns. In future, VAT returns will have to be prepared without any manual work and will only be capable of being transmitted via a particular interface. The requirements will be tightened in three waves between April 2019 and April 2020. Taxable persons not established in the UK will be affected as from October 2019 and should now prepare accordingly. KMLZ offers a VAT returns filing service via software with a digital API. This API enables the digital data flow specifications to be fulfilled.
The current ECJ judgment in the legal case baumgarten sports & more GmbH is a welcome relief for taxable persons as regards transactions involving payment by instalments (ECJ, judgment of 29.11.2018 – C-548/17). Even if taxable persons are subject to taxation based on agreed consideration, they will, in the future, be able to avoid having to pay VAT en bloc to the tax office at the time the (first) supply is rendered. Therefore, under certain conditions, the supplying taxable person will no longer have to pre-finance VAT in the case of such transactions.
The "German Annual Tax Act 2018" was passed by the Bundesrat on 23.11.2018. The following changes apply to VAT: Recording obligations and liability for electronic marketplaces are introduced. The law regulates, for the very first time, the taxation of vouchers. The definition of taxable amount is adapted to the VAT Directive. Finally, the Act contains three simplifications for electronic services, as well as for telecommunications and broadcasting services.
In its current judgment Vădan (judgment of 21.11.2018 – C-664/16) the ECJ states, for the first time, that the submission of invoices is not a mandatory requirement for the deduction of input VAT. The strict application of the requirement to produce invoices would conflict with the principles of neutrality and proportionality. Hence, taxable persons can also claim input VAT deduction if they are able to prove the necessary (substantive) requirements by means of objective evidence. Taxable persons that were denied the right to deduct input VAT by the tax authorities, due to a lack of invoices, should now (re-)examine whether they can provide objective evidence by other means.
Numerous legal questions exist concerning the settlement of past property developer cases. The German Federal Fiscal Court recently ruled on one of these issues: A property developer's claim for a VAT refund is not dependent upon whether he has paid the tax amount to the supplier or whether the tax authority can offset it. The findings of the German Federal Fiscal Court are not only positive for property developers but also other business sectors, such as purchasing associations, who could benefit.