After concluding a so-called gross price agreement, parties sometimes recognise that the supply is VAT-exempt. Normally these kinds of agreements do not allow for the recovery of VAT. On 20.02.2019, the Federal Court of Justice decided that such civil law claims may, sometimes, exist. A case’s chances of success, however, rest on its individual facts. Cases with a chance of success will be those where the views of the tax authorities, applicable at the time the contract was concluded, are subsequently regarded as being incorrect. The Federal Fiscal Court decided, in 2014, that the sale of patient customized cytostatic drugs by a hospital pharmacy, as part of its outpatient hospital treatments, is VAT-exempt.
The Federal Ministry of Finance does not raise complaints until 15.04.2019, provided that marketplace operators have at least received their online retailers’ applications submitted by 28.02.2019 for the issuance of registration certificates.
Most recently, the ECJ and the Federal Fiscal Court clarified that success-dependent remunerations paid for participating in competitions are not subject to VAT. In a recent Federal Fiscal Court decision of 25.07.2018 (XI B 103/17) this newer case-law is confirmed. The fact that, in addition to the activity associated with uncertainties, there is a further, definite activity, does not lead to the success payment being subject to VAT. When concluding contracts for success-dependent remuneration, it is important to check to which activities relevant payments relate and at what point in time any uncertainty about such payments exists. If there is uncertainty, at the point in time the supply of service is rendered, whether or not a payment will be made, the transaction is not subject to VAT.
The Federal Fiscal Court has made a landmark decision on communities of part owners: From a VAT perspective, communities of part owners no longer exist. Consequently, the “mystery” associated with communities of part owners lives on. Our newsletter advises you about the practical consequences of this decision and why it falls back to the tax authority to impose Federal Fiscal Court decisions with non-application decrees
The German Ministry of Finance provides comprehensive comments on the new regulations regarding the liability of operators of electronic marketplaces. Unfortunately, a number of practical issues that are relevant to marketplace operators remain unanswered.
BAHRAIN introduces online portal for tax registrations +++ BRAZIL plans to introduce a standardized VAT system +++ INDIA extends the applicability of the reduced tax rate +++ CROATIA abolishes the local reverse charge mechanism for companies which are VAT registered +++ AUSTRIA plans to make operators of online market places liable for tax deficits +++ POLAND shortens deadline for classification of bad debt in order to reduce the tax base +++ PORTUGAL introduces reduced VAT rate for the supply of e-books +++ CZECH REPUBLIC plans to introduce a general reverse charge mechanism for all supplies +++ UK pushes “Making Tax Digital” initiative +++ USA extends obligation for online sellers to register for tax purposes.
In its judgment in the legal case Morgan Stanley (C-165/17), the ECJ commented on the calculation of the deductible proportion from general costs. The decision is interesting for reasons beyond the financial services sector, as the ECJ makes generally applicable statements. It concerns the deductible proportion of an establishment rendering taxable output transactions in a Member State; this establishment also uses input supplies for internal supplies to its principal establishment located in another Member State. The principal establishment itself renders taxed and VAT-exempt output transactions.
On 4 December 2018, the ECOFIN adopted the so-called Quick Fixes, to operate as of 1 January 2020. The regulations on chain transactions are one central and long-awaited component thereof. However, the new Art. 36a EU VAT Directive only concerns itself with chain transactions within the EU and further restricts itself to cases in which an intermediate party orders the transport. There are no regulations on chain transactions with third countries or regarding cases where the first supplier or the last recipient orders the transport. In any event, companies must now use the time remaining until the end of the year to adapt their processes to the new regulations.
On 4 December 2018, the ECOFIN adopted the so-called Quick Fixes, to operate as of 1 January 2020. These also include an EU-wide simplification rule for consignment stock cases. Standardisation and simplification are of course to be welcomed. However, it should be noted that the recent case law of the Federal Fiscal Court remains applicable. In addition, entrepreneurs must consider how the various requirements can be fulfilled in practice on a permanent basis. Alternatively, they will have to consider whether and how to actively deselect the application of the simplification rule in order to avoid inconsistencies.
Since 4 December 2018, the Member States have been free to apply the reduced VAT rate to e-books. In our opinion, applying the reduced VAT rate should now be considered mandatory. E-book suppliers would, in particular, benefit. If they have agreed upon gross prices with their customers, the reduced VAT rate increases their margin. Taxable persons, such as libraries, universities or other public institutions, which are often not entitled to input VAT deduction for the purchase of electronic publications from abroad but have to pay VAT (reverse charge scheme), would also benefit. However, the changed legal situation can pose new VAT challenges e.g. in instances where the various contents of databases are to be treated differently.
