From time to time, taxable persons find themselves accused of being involved in VAT carousels. The tax court in Baden-Wuerttemberg recently granted a suspension of enforcement to such a taxable person. If there is VAT fraud in a supply chain, denying the input VAT deduction for every purchase in the chain is more than the principle of neutrality requires. Furthermore, the suspension was granted, as the enforcement of the VAT assessments would have resulted in significant financial hardship for the Applicant.

The Federal Fiscal Court has recently amended its case law regarding VAT groups and has decided that a partnership may be a controlled company. The heads of unit regarding VAT have discussed the judgments and the results have now been published by the Upper Tax Authority Frankfurt/Main. Fundamentally, the decisions are unlikely to be generally applicable. Right now, the tax authorities only recognize a GmbH & Co. KG, which is completely controlled by a person, as a part of a VAT group.

On 25 February 2015, the Federal Fiscal Court published two pathbreaking decisions regarding the allocation of the transport in chain transactions: XI R 30/13 and XI R 15/14 (see Newsletter 12/2015). In particular, the Court decided that sec. 3.14. para. 8 sentence 2 of the Administrative VAT Guidelines is not fully compatible with the jurisprudence of the ECJ. The allocation of the transport and the place where the right to dispose of the goods is transferred cannot be determined based on who has ordered or carried out the shipment. In its judgement XI R 30/13, the Federal Fiscal Court referred the case back to the Fiscal Court Rheinland-Pfalz because of missing factual determinations. The Fiscal Court redetermined the case and delivered its decision on 31 May 2016 (3 K 1364/15). The result is not surprising. The Fiscal Court followed the guidelines of the Federal Fiscal Court. However, the Court’s reasons for its decision are partly astonishing.