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.
The Federal Ministry of Finance adapts the administrative guidelines on determining the place of supply, in the field of education and science, to the ECJ case law. The respective notification was published on 09.06.2021. From now on, the event location principle contained in art. 53 VAT Directive applies to events in the B2B sector with an open, as well as a closed, group of participants. At the same time, it is clarified that, for online seminars to taxable persons, the standard B2B rule according to art. 44 VAT Directive applies. Seminar providers and businesses from the event sector should immediately review the VAT assessment of their services.
The requirements for the existence of a fixed establishment are regularly put to the test at both a national and international level. In the current Titanium case (C-931/19), the ECJ was asked to decide whether a fixed establishment requires both human and technical resources available on site. In particular, the case concerned a property which was rented out and where no own staff was active on site.
The legislator has “stealthily” extended the statute of limitations in certain criminal tax law cases from 10 to 15 years. This change was brought about by the so-called cum-ex cases. However, it also has an impact on VAT issues. For corrections that shall protect from criminal charges regarding tax evasion, the new statute of limitations of 15 years must be observed.
The Federal Fiscal Court has implemented the ECJ judgment in the case Mitteldeutsche Hartstein-Industrie AG (C-528/19) and made two crucial statements: an indirect link is sufficient for the deduction of input VAT and a supply carried out free of charge is not taxable if there is no threat of an untaxed final consumption. This clear Federal Fiscal Court decision is pleasing. After 10 years, the tax authority has been compelled (once again) to change its mind. This time in favour of taxable persons.
Warranty commitments are a common instrument used in sales promotion. Since they are on the borderline between VAT and insurance tax, they are also a hot topic from a tax perspective. In particular, warranty commitments in the car trade have become well-known, due to the Federal Fiscal Court having taken a number of decisions in this area in recent years. In addition, the Federal Central Tax Office, which is responsible for insurance tax, has also taken a special interest in cases concerning warranty commitments as a field of examination. Uncertainty has therefore been considerable over the last few years. The Federal Ministry of Finance has now taken up the issue and assessed it from both a VAT and an insurance tax perspective.
The Federal Fiscal Court decided that, in 2006, an investment company could not claim input VAT deduction from certain services which it had procured for its activities as the manager of a real estate investment fund. More precisely, this concerns services, the costs of which are charged by the investment company to the investment fund without a profit mark-up. Based on this decision, it is likely that the tax authorities will reject the input VAT deductions of capital management companies in similar constellations.