The third part of our newsletter series on the Annual Tax Act 2020 deals with the special regulation for the import of consignments with a maximum value of EUR 150. For such low value consignments, which are to be delivered directly from the third country to customers in the country of import, the presenting service providers will, in future, be able to carry out the import on behalf of and for the account of the recipient and also pay import VAT on their behalf. However, according to sec. 21a of the German VAT Act (draft), an application by the service provider is required for this purpose.
In the second part of our short series we are examining the implementation of the E-Commerce Package in the Annual Tax Act 2020. The draft bill contains significant changes for electronic interfaces (in particular online marketplaces). In certain cases, a deemed chain transaction according to sec. 3 para. 3a of the German VAT Act (draft), between an online trader, an electronic interface (e.g. online marketplace) and an end customer. The electronic interface (e.g. online marketplace) thus becomes liable for VAT.
The German Federal Ministry of Finance has published the draft bill for an Annual Tax Law 2020. Extensive changes are planned in the area of VAT. In a short series, we will take up and examine one topic each day over the next few weeks. In this newsletter we will first give a general overview of the planned changes and when they could come into force.
In practice, the distinction between payment for damages and remuneration for a supply plays a recurring role. The ECJ recently ruled on this question in the case of Vodafone Portugal. In this ruling, the ECJ found that amounts paid by customers to their contractual partners in the event of premature termination of a contract, are subject to VAT. This ruling is significant for all companies which conclude contracts with a predetermined minimum period. However, as the German VAT Circular has, so far, taken a different view, the decision is likely to only have implications for the future.
Does a server cabinet constitute part of a computer hosting centre building? The current decision of the ECJ of 02.07.2020 on this issue in the case A Oy (C-215/19) was eagerly awaited. This is because the facts of the case can be readily transferred to everyday business life in the plant and mechanical engineering sector. There, one is constantly exposed to the question of the possible connection of transactions to immovable property. Moreover, the ultimate answer to this question should be the same in all Member States. In practice, however, uniform application of the standards on the concept of immovable property within the European Union is still a long way off.
In the ECJ ruling of 18 June 2020 in the case KrakVet (C-276/18), the primary issue was whether a company can engage in "VAT rate shopping" by structuring its transport arrangement in a particular way. KrakVet’s goal for its distance sales to Hungary was only to pay 8% Polish VAT, rather than 27% Hungarian VAT. The specific question was whether, according to the chosen arrangement, the goods were dispatched or transported "by the supplier (KrakVet) or on its behalf" and thus whether Art. 33 of the VAT Directive was applicable. Similar wording is also found in Article 36a VAT Directive that stipulates to which supply the transport shall be ascribed to in chain transactions. One must therefore ask oneself what significance the ECJ's statements on transport arrangements have beyond the distance sales.
The Federal Ministry of Finance’s letter of 2 July 2020 contains simplifications for the catering and hotel sector. According to this letter, caterers may use 30% of the flat rate price for beverages during the period from 1 July 2020 to 30 June 2021 when splitting up the total sales price for food and beverages. Accommodation providers may calculate 15% of the flat rate price for supplies subject to the regular VAT rate and not directly related to accommodation (previously 20%).
The requirement of bookkeeping and documentary evidence for the zero-rating of export supplies of goods has been the subject of ongoing discussion in recent years. In its letter of 25 June 2020, the Federal Ministry of Finance declares that the decisions of the ECJ issued in this area in recent years are now to be applied. To this end, it is adapting the German administrative VAT guidelines accordingly. It is also taking this opportunity to make minor adjustments to the rules on the proof of export of goods carried in the personal luggage of travellers.
Is the provision concerning a VAT group, in accordance with sec. 2 para. 2 no. 2 of the German VAT Act, compatible with Union law - and if so, how far does the scope of the VAT group extend? The V. Senate of the Federal Fiscal Court has now taken the opportunity to refer these two questions to the ECJ (Ref. V R 40/19). Some people may experience a sense of déjà vu as regards the first question referred, as the XI. Senate of the Federal Fiscal Court recently referred this question to the ECJ itself (Ref. XI R 16/18). However, the V. Senate goes beyond the question referred by the XI. Senate, at least in terms of its second question. The outcome is not only important for the public sector, but also for non-profit institutions and for mixed holdings.
Many game apps offer the user the option of purchasing additional benefits in the form of so-called in-app purchases via the app store on his/her smartphone. In its recent decision, the Tax Court of Hamburg dealt with the VAT treatment of these in-app purchases. In particular, it concerned itself with the question of who, from a VAT perspective, is the supplier vis-à-vis the user, the app developer or the app store.