The ECJ continues to soften the right to deduct VAT as seen in the legal case Iberdrola (C-132/16). This decision reignites the discussion about the question of the VAT treatment of development costs. The German Federal Fiscal Court’s case law and administrative opinion are, once again, on trial. Moreover, the decision may also be of general importance concerning VAT deduction.

In 2016, the Federal Fiscal Court had to decide, for the very first time, two cases concerning how supplies via consignment stocks are to be treated. The German Ministry of Finance has now taken on these decisions in the VAT Circular. The undifferentiated view of the Frankfurt Regional Tax Office’s Circular is now a thing of the past. Companies, be they suppliers or customers, who have not already become active after the publication of the Court’s decisions, should now examine whether their supplies, made via consignment stocks or other warehouses, are being handled correctly. This is relevant to all supplies from other EU member states as well as from non-EU countries and even for domestic supplies in Germany. Amendments can be made in a transitional phase until 31 December 2017.

The time has come: The EU Commission has given the go-ahead to implement the final VAT system. This is the beginning of a transition phase in which various changes are to come into force between 2018 and 2022. As a first step, EU-wide regulations for chain transactions and consignment stocks are on the agenda. With respect to intra-Community supplies, the VAT-ID no. shall become a material requirement for the VAT exemption and a uniform framework for documentary evidence shall be defined. The status of the certified taxpayer is to be introduced as a central element. Only companies having this status will be able to benefit from comprehensive simplification rules. As the coming months will bring fundamental changes, companies should start dealing with them now by drawing up a road map.