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.
In a notification dated 3 May 2021, the Federal Ministry of Finance extended the applicability of the VAT exemption for the turnover of trading platforms for cryptocurrencies. From now on, in addition to centralised exchanges (CEX), decentralised exchanges (DEX) can also apply for the VAT exemption for financial services in accordance with Sec. 4 No. 8 German VAT Act. Fortunately, it has now been clarified that IT services related to the exempt supplies are also VAT-exempt. Those affected will be required to shortly adjust their accounting systems. However, VAT refunds for the past could also result. The notification is therefore important for all crypto trading platforms.
In its letter dated 20.04.2021, the Federal Ministry of Finance amends the VAT Circular with regard to the regulations on marketplace liability, which already came into force on 01.01.2019. On this occasion, it also comments on the adjustments made to secs 22f, 25e of the German VAT Act with effect from 01.07.2021. Regarding the recording obligations of online marketplaces, it is particularly relevant that the VAT-ID of the online trader replaces the frequently criticized tax registration certificate.
The ECJ ruled that – contrary to sec. 2.8 para 5a of the German VAT Circular and the opinion of the V. Senate of the Federal Fiscal Court – a partnership can constitute a controlled company of a VAT group even if not all shareholders are financially integrated into the controlling company. Compared to the previous national understanding, the ECJ thus extends the possibilities for a partnership to qualify as a controlled company. Until such time as the judgment is implemented by the German tax authorities, taxable persons should be able to choose which legal interpretation they wish to follow.