A few days before the start of the Oktoberfest, the Federal Fiscal Court published a decision on the applicable VAT rate for the sale of pretzels. The Court reconfirmed its current case law as regards the supply of restaurant services. The result: Where pretzels are sold by sellers with a vendor’s tray, a VAT rate of 7% applies. If the Brezn is sold by a beer tent operator, the standard VAT rate of 19% applies. Although the result gives no cause for complaint: From a Bavarian perspective, the explanation for the ruling is quite “scandalous” and requires a counterstatement. We wish you a pleasant Oktoberfest!
Service offerings below cost price often result in an excess of input VAT. At the end of 2016, the V. Senate of the German Federal Fiscal Court assumed that an emerging asymmetry would indicate that the person performing the supply was not acting as a taxable person (KMLZ-Newsletter 8/2017). In this case, VAT deduction would not be possible. A new judgment of the XI. Senate clarifies that, when checking if a person is acting as a taxable person, all aspects of the individual case must be taken into account in an overall assessment. The decision, regarding the public sector, might also ultimately impact on the private sector.
The Federal Fiscal Court has referred the question of the possible VAT exemption of driving schools to the ECJ (Ref. V R 38/16). Fortunately, the referred questions are comprehensive. If the ECJ affirms a VAT exemption, its scope of application will be expanded. Such a ruling may ultimately result in the supply of educational services, by other commercial schools and self-employed teachers, also being found to be VAT exempt. In order to benefit, to the optimum level from the VAT exemption, affected taxable persons need to react now.
The upcoming introduction of a split payment system by the Romanian tax authorities will enable them to control future payment transactions between taxpayers. It is expected that, as of 1 January 2018, it will be mandatory for customers to transfer invoiced VAT amounts to a special tax account of the supplier. The regulation will also be applicable for taxpayers not established in Romania but registered for VAT purposes there.
The German Ministry of Finance implements Federal Fiscal Court case law with respect to the waiver of VAT exemptions, as well as the withdrawal thereof. Accordingly, in the future, the waiver and its withdrawal are still permissible up to the substantive enforceability. However, this does not apply to the supply of immovable property outside of a foreclosure procedure. In the future, a taxable person can only opt for VAT liability when a notarial sales contract is concluded.
GREECE extends local Reverse Charge mechanism +++ INDIA implemented new VAT system +++ ITALY shortens period for claiming input VAT and extends split-payment-system +++ POLAND intends to implement split-payment-system and extends SAF-T reporting obligations +++ ROMANIA introduces data-base for high risk businesses +++ RUSSIA intends to increase standard VAT rate by 4 percentage points +++ SWITZERLAND considers global turnover to be decisive for the liability to pay VAT +++ HUNGARY implement obligation to electronically transfer invoice details after a preliminary test phase and publishes “Blacklist”.
Once again, the ECJ has had to decide on how to ascribe the transport of goods in a chain transaction. The ECJ maintains the principles of its case law in its judgment of 26 July 2017 (case Toridas, C-386/16). However, it also sees a decisive criterion in the notification of the resale of the goods, before they leave the country, in order for the transport not to be allocated to the first supply. This will need to be considered in the future.
Based on two decisions of the German Federal Fiscal Court (XI R 25/12 and V R 6/13) regarding cross-border price discounts, the German Ministry of Finance has now completely revised sec. 17.2 of the German VAT Circular. What is pleasing is that the revision provides clarification that a recipient is not obliged to reduce its input VAT if the price reduction is granted by a supplier carrying out a supply of goods from other EU Member States or non-EU countries. However, what is not so pleasing is the extensive obligation to provide proof.
The Federal Supreme Court recently ruled, that tax evasion could be considered as already having been detected, even before the tax office has examined the relevant tax return. Once the tax crime is considered as detected, self-disclosure no longer offers exemption from punishment. This may also apply to VAT: When a VAT return requires correction, it might already be too late for a self-disclosure with the effect of exemption from punishment. The assumption of an intentionally committed tax evasion can be effectively prevented by the implementation of a Tax Compliance Management System.
It is difficult for corporations to establish the organizational integration for a VAT-group. Recently, the V. Senate of the Federal Fiscal Court interpreted this feature very strictly. Now, however, it is the V. Senate which, by judgment of 10 May 2017 – V R 7/16, has stated that an organizational integration is possible even in the absence of personnel interweaving of the executive bodies, if a controlling and profit-and-loss transfer agreement exists.