Unusual constellation – the plaintiff, a taxable person, assumed that it would be liable for undue VAT shown on debit notes. The tax office, however, denied the VAT liability. The Tax Court of Baden-Wurttemberg agreed with the plaintiff (see decision of 11.12.2017 file ref. 9 K 2646/16). It granted approval to cancel the undue VAT shown in the debit notes, a prerequisite for claiming the VAT amount from the tax office. The decision creates significant uncertainty for other taxable persons.

On 27.02.2018 the German Ministry of Finance issued its very first notification regarding the VAT treatment of Bitcoin. Accordingly, the use of Bitcoin is to be treated the same as traditional currencies. Payments with Bitcoin are therefore not taxable. The exchange of Bitcoin into traditional currencies is tax exempt. However, VAT risks arise for online platforms, which allow virtual currencies to be traded via their platform. The tax exemption does not apply to the services provided by the platform. Additional VAT payments might be due.

According to the Federal Fiscal Court, a fixed interest charge of 6% per annum on tax arrears does not violate the general principle of equal treatment or the prohibition of excessiveness. Following sec 233a and sec 238 German Federal Fiscal Code, interest is due if a tax assessment leads to a subsequent payment in respect of an earlier tax assessment. Nevertheless, there is hope: The decision was applied to income tax in 2013. As VAT is based on European law, different stipulations could be applicable to it.