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In a letter dated 7 February 2022, the German Federal Ministry of Finance comments, for the first time, on the VAT treatment of the increasingly popular use of electric vehicles and company bicycles. Fortunately, from now on, and for the past, the 1% regulation can also be applied to (electric) bicycles. However, the German Federal Ministry of Finance also clarifies that the various income tax benefits in this area do not apply to VAT. This means high administrative burdens for all entrepreneurs, who must determine different tax bases for income tax (especially wage tax) and VAT.
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According to Union law, the right to deduct input VAT arises when the deductible VAT becomes chargeable. In its recent ruling, the ECJ confirms this rule also for the case that the VAT becomes chargeable only upon receipt of payment due to the supplier calculating its VAT on the basis of the remuneration received (cash accounting scheme). The recipient can then deduct the input VAT only at the time of payment. This applies to all recipients, irrespective of how they calculate their VAT. In this respect, the German law and the current view of the tax authorities are contrary to Union law.
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The demarcation between compensation for damages and consideration for supplies rendered, has been an ongoing issue in daily practice. According to sec. 1.3 para. 3 of the German VAT Circular, contractual penalties, inter alia, are deemed to be compensation for damages rather than consideration for supplies. The ECJ is now narrowing this view. In its judgment of 20 January 2022, (C-90/20 – Apcoa Parking Danmark A/S), it ruled on a case concerning the use of a private sector parking space. If a motorist violates the general conditions of use when using a parking space and, as a result, is required to pay an (additional) amount of money, the ECJ considers this to constitute consideration for a supply of service, subject to VAT, for the specific use of the parking space.
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