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Umsatzsteuer Newsletter 15/2020
Powder keg VAT group: ECJ decides on a billion-euro budget gap
The German Federal Fiscal Court has referred a case to the ECJ that overshadows all previous cases. It raises the fundamental question of whether the national legal institution of the VAT group is compatible with Union law. The ECJ's judgment may result in all previous VAT returns of controlling companies being deemed incorrect. Requests for correction would be possible within the limitation period. As a result, a billion euro budget gap would become apparent. The Federal Fiscal Court is clearly in favour of the introduction of group taxation. The legislator will now have to act quickly.
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Umsatzsteuer Newsletter 14/2020
Federal Fiscal Court rejects special calculation of the deductible proportion of input VAT used by credit institutions (Philipowski method)
A number of credit institutions calculate their deductible proportion of input VAT using the so-called Philipowski method. Recently, the Munich Tax Court found this method of calculating the deductible proportion of input VAT not to be appropriate. The Federal Fiscal Court has now confirmed this decision. Nevertheless, the following still applies: Every taxable person with partly taxable and partly VAT exempt output transactions can estimate its own deductible proportion of input VAT. If this estimate is appropriate, the tax authorities must accept it.
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Umsatzsteuer Newsletter 13/2020
Tax Court of Lower Saxony: VAT group also covers non-economic activities
The Finance Court of Lower Saxony has established that a VAT group also extends to cover the non-economic activity of the controlling company. This means that supplies of services of a controlled company to the non-economic part of its controlling company are not subject to VAT. Furthermore, these transactions cannot be classified as supplies free of charge that are deemed to be subject to VAT. The judgement is not only relevant for the public sector, but also for non-profit institutions and mixed holdings.
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