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.
In its decision published on 18.08.2021, the German Federal Constitutional Court declared the interest rate of 6% p.a., pursuant to sections 233a and 238 of the German Fiscal Code, to be unconstitutional. This applies to interest periods from 01.01.2014 onwards. However, at the same time, the Federal Constitutional Court ordered that the unconstitutional provision can, nevertheless, continue to be applied to interest periods until the end of 2018. Only for interest periods dating from 01.01.2019 is the legislator obliged to pass a new (retroactive) regulation. This new regulation must be put in place by 31.07.2022. The Federal Constitutional Court has now ruled on interest concerning a trade tax claim. In the case of interest on VAT liabilities, doubts remain as to whether the interest rate and the assessment of interest in general are in accordance with EU law. Taxpayers could take advantage of these doubts as regards the past.
In mid-July, severe storms hit large parts of Germany and caused enormous damage. The regions worst affected were in Rhineland-Palatinate and North Rhine-Westphalia, but also in Bavaria and Saxony. The tax authorities have reacted to this disaster by means of the introduction of a variety of equitable regulations. This should at least mitigate the financial damage caused to affected businesses. In addition, the enormous willingness of companies to help with the disaster relief is to be promoted by refraining from taxing supplies carried out free of charge and the adjustment, for a limited period of time, of input VAT in accordance with sec. 15a of the German VAT Act.
The main objective of the OSS procedure is explicitly to provide taxable persons with a solution that is as lean and unbureaucratic as possible. However, according to information from DATEV, this simplification will not be available in the foreseeable future, at least not for existing registrations. Corrections to supplies and services that were made prior to a taxable person’s use of the OSS procedure should only be taken into account in the procedure where they have been declared initially. In practice, however, this would involve a disproportionately high effort.
In sec. 2.2 para. 2 sentence 7 of the German VAT Circular (UStAE), the Federal Ministry of Finance (BMF) has so far assumed that a member of a supervisory board performs his or her activities on a self-employed basis. In its latest letter dated July 8, 2021, the BMF has now changed its view. In doing so it has adopted the latest case law of the ECJ and BFH. Accordingly, a supervisory board member is now not considered to be self-employed if he or she receives a fixed remuneration or a remuneration whose variable component does not reach ten percent of the total remuneration. These principles also apply to members of other supervisory bodies, but not to members of management bodies. The new regulation is to be applied to all open cases. However, the Ministry has granted a transitional phase until December 31, 2021.
The German legislator has implemented the EU regulation on the VAT exemption of the management of special investment funds in sec. 4 no. 8 lit. h of the German VAT Act. A problem that repeatedly arises in practice is whether the specific supply of services, by its nature, still qualifies as “management” of special investment funds within the meaning of the legal provision. In a recent case decided by the ECJ, it was precisely this delimitation that was in question. In its decision, the ECJ added an important detail to the principles already decided. Even if the supplier does not undertake a task in its entirety, the supply can still be VAT exempt.
The 5th Senate of the Federal Fiscal Court has upheld its jurisprudence: the letting of car parking spaces to residential tenants can constitute a VAT exempt supply of ancillary services. Previously, the Fiscal Court Thuringia had ruled to the contrary, namely that the lack of a spatial and economic link precludes the assumption of a supply of ancillary services. The German Federal Fiscal Court’s response to the Fiscal Court took the form of a broad interpretation of the supply of ancillary services and a repudiation of the arguments of the previous judgment, put briefly, but quite distinctly.
It was already back in 2018, that the Federal Fiscal Court decided that the personal characteristics applicable for the VAT-exemption for cultural services (sec. 4 no. 20 lit. a German VAT Act), within the context of service commissions, also needed to be applied to the undisclosed agent's supply of service. On 9 June 2021, the Federal Ministry of Finance published a letter confirming that, in the future, this decision is to be generally applied. The German VAT Circular will be adjusted accordingly. Unfortunately, however, the Federal Ministry of Finance has refused to transfer the principles of the judgment to personal characteristics of other VAT exemptions. All undisclosed agents should check whether it is possible to settle accounts without VAT for the future and whether VAT refunds can be applied for the past.