In its decision of 25.04.2018, the Federal Fiscal Court’s 9th Senate voiced “serious doubts” as regards the constitutionality of the interest rate charged on tax arrears. The Federal Ministry of Finance’s now instructs tax offices to grant the suspension of the execution for all interest assessments which are based on sec 238 General Fiscal Code. However, this only applies for interest periods as of April 2015. Moreover, taxpayers must first appeal against the interest assessment and apply for the suspension.
In practice, the time a supply takes place, is one of the most common pieces of mandatory information missing from invoices. According to the latest Federal Fiscal Court case law (decision of 01.03.2018, V R 18/17), this missing information may be concluded from the date of issue of the invoice. The prerequisite for this is that according to the circumstances of the respective case, it can be expected that the supply was rendered in the month the invoice was issued.
Input VAT deduction from advance payments is part of a taxable person’s daily business. Where the supply does not take place, input VAT deduction can only be denied if the payer, at the time of the payment on account, knew or reasonably should have known that the supply was uncertain (judgement of 31.05.2018, C-660/16 and C-661/16, Kollroß und Wirtl). If the payer only acquires this knowledge later, he must adjust the deduction of input VAT only in circumstances where he recoups the advance payment from the contracting party.
In its letter of 23.04.2018, the Federal Ministry of Finance withdrew the so called “French Fries Decree”. Until very recently, a supplier established somewhere in the Community territory outside Germany could, under certain circumstances, invoice its German customers with German VAT, even where the recipient of the goods was already known at the beginning of the transport in the country of departure. The Federal Ministry of Finance has cited the avoidance of the risk of tax losses as the reason for the change, which applies to all open cases. The Federal Ministry of Finance has granted German customers a transitional period until 31.12.2018 for deducting input tax.
In its legally binding judgement of 16.03.2018 (1 K 338/16 U), the tax court Düsseldorf granted input VAT deduction from an incomplete invoice. The incomplete invoice did not explicitly refer to any other invoice documents, which contained the missing information. Nevertheless, the tax court Düsseldorf granted the input VAT deduction anyway. This is because a specific and unambiguous reference to other accounting documents relating to the incomplete invoice was derived from the factual connection. It is not required that an incomplete invoice explicitly refers to other invoice documents.
The 9th Senate of the Federal Fiscal Court has voiced “serious doubts” as regards the constitutionality of the interest rate on tax arrears. The rate is 0.5% per month (i.e. 6% per year). The court considers the interest rate to be “unrealistic” and that it violates the general principle of equal treatment pursuant to Art 3 para 1 of the German Constitution. Furthermore, the court regards the interest rate as excessive, thereby infringing Art. 20 para 3 of the German Constitution. As a consequence, taxpayers should appeal against interest assessments on tax arrears and apply for a stay of execution.
Companies receiving travel services have a choice as to whether to apply sec. 25 of the German VAT Act (which violates EU law) or art. 306 ff. of the EU VAT Directive. The German Federal Fiscal Court confirmed this in its judgment of 13.12.2017, which was published on 02.05.2018 (XI R 4/16). This allows companies to choose the most preferable taxation scheme, for themselves and for their customers, who ultimately have to bear the VAT burden. As a result, companies have a maximum degree of flexibility and can theoretically generate non-taxed turnover. This remains applicable until the legislator reacts and adapts sec. 25 of the German VAT Act.
The ECJ has made triangulation supplies easier to carry out through its judgment in the case of Hans Bühler KG (judgment of 19.04.2018 - C-580/16). The simplification rule for triangulation supplies is also applicable if the intermediate is established or registered in the country of departure. This means that businesses could possibly avoid registrations abroad. The situation is to be analyzed against this background and the progress in the relevant countries is to be followed. The ECJ also restricts the importance of the formal requirements, as it views EC Sales Lists, which have not been filed or filed late, as being harmless. This could also apply to other formal requirements, such as invoicing.
In the EU Commission’s view, the existing corporate tax law has failed when it comes to the taxation of revenue generated by the digital economy. An interim tax of 3% on specific online revenues should be levied until the OECD has remedied the situation. Companies with a world-wide revenue exceeding EUR 750 million would be affected. The placing of online advertising, the facilitation of online sales portals and the sale of user data would all be taxed. Thus, the digital service tax would be focused on the USA’s internet giants.
The ECJ repeated in its Biosafe decision (judgment of 12.04.2018 – C-8/17), the reasoning contained in the case Volkswagen AG, namely that a national regulation, regarding a limitation period is not applicable in certain circumstances. Whereas the case Volkswagen AG considered an input VAT refund claim according to Directive 2008/9/EU, the case Biosafe concerned the regular taxation procedure. This decision may also have an impact on the German regulation regarding the Statute of Limitations, sec. 169 ff. German General Fiscal Code.