The long-awaited Federal Ministry of Finance letter on the retroactive effect of invoice correction and the deduction of input VAT, in the absence of a proper invoice, has now been published. The Federal Ministry of Finance’s letter implements the ECJ case law of 15 September 2016 in the cases of Senatex and Barlis 06, as well as other subsequent rulings. Accordingly, an incorrect invoice, which contains the five core characteristics, can now be corrected retroactively. In the instance of a presumed reverse charge case, showing VAT retroactively is also possible. A retroactive correction of an invoice is also possible in circumstances where the correction is made by cancelling and issuing a new invoice. Input VAT can also be deducted from an incorrect invoice without an invoice correction if the taxable person is able to provide objective proof in other ways. However, according to the Federal Ministry of Finance, showing VAT in an invoice is a key element and cannot be replaced by any other form of evidence. Furthermore, input VAT deduction, without an invoice, remains impossible.
In a chain transaction, the goods must be shipped directly from the first supplier to the last customer. Whether this is also the case when the first supplier and the last buyer each order a partial transport (so-called “broken transport”) is disputed. In its judgement of 17.06.2020 (ref. 7 K 7214/17), the tax court Berlin-Brandenburg affirmed the chain transaction, despite broken transport. The effect of the judgement should be manageable. It is only convincing to a limited extent and the other Member States concerned are not bound by it.
If a participant in a supply chain commits VAT fraud, the tax authorities often hold other companies in the supply chain liable. The allegation that a company "should have known" about a particular VAT fraud is one argument, which is readily asserted by the tax authorities against affected companies, in an effort to deny them input VAT deduction or zero-rating for cross-border supplies or even both. However, a number of recent decisions provide some degree of assistance: The German Federal Fiscal Court has now decided that the simple non-payment of VAT is not sufficient for the purposes of establishing the existence of VAT fraud. The Fiscal Court of Berlin-Brandenburg wants to establish a strict understanding of the term “supply chain“ and is referring questions concerning this issue to the European Court of Justice. The Fiscal Court of Hessian recently obliged a tax office to pay out input VAT amounts by way of interim relief, in a case where the tax office's accusations were unsubstantiated.
The Federal Fiscal Court has strengthened its restrictive opinion regarding retroactive invoice correction. In accordance with its previous jurisdiction the Court adheres to its earlier opinion that an invoice is a mandatory requirement for the deduction of input VAT. The Court confirms that a retroactively correctable invoice must satisfy five minimum requirements, including a specification of the supply, from which it must be possible to identify the supply being invoiced.
IRELAND reduces standard VAT rate to 21% as of 01.09.2020 +++ AUSTRIA reduces VAT rates for hospitality, as well as for the cultural and tourism sector +++ BULGARIA reduces VAT rate for hospitality +++ CZECH REPUBLIC reduces VAT rate for accommodation services and for cultural and sporting events +++ UK reduces VAT rate for hospitality and for cultural events and accommodation +++ UK plans to abolish MTD reporting threshold as of April 2022 +++ POLAND publishes simplified rules for the application of the White List regulations +++ SERBIA AND NORWAY extend deadline for submission of input VAT refund claims
In the thirteenth and last part of our KMLZ newsletter series on the Annual Tax Act 2020, we present the new regulation of sec. 14 para. 4 sentence 4 of the German VAT Act. According to this regulation, the correction of an invoice for missing or incorrect information does not constitute an event with retroactive effect within the meaning of sec. 175 para. 1 sentence 1 no. 2 of the German General Fiscal Code and sec. 233a para. 2a of the German General Fiscal Code. The retroactive effect of an invoice correction applying to periods of assessment, which have already expired, can thus lead to a permanent loss of input VAT deduction in individual cases. In addition, the regulation also has an impact on interest on late payments and refunds. Unfortunately the new regulation doesn’t go far enough.
In the twelfth part of our newsletter series on the Annual Tax Act 2020 we are examining the amendments of the previously relatively unknown fine provisions in the German VAT Act. Due to the planned changes, the tax authorities are likely to focus more on these regulations in the future. Companies are therefore called upon to review their processes - especially their payment methods – already now.
In the eleventh part of our KMLZ newsletter series on the Annual VAT Act 2020 we comment on the planned changes regarding cross-border price reductions, which the supplier grants, not directly to his customer, but to another recipient in the supply chain. With the implementation of sec. 17 para 1 sentence 6 into the German VAT Act, a legal loophole will be closed. When the Annual VAT Act 2020 comes into effect, it will no longer be possible to reduce the output VAT when the supply to the recipient, who benefits from the price reduction, is VAT exempt.
In the tenth part of our newsletter series on the Annual Tax Act 2020 we focus on the implementation of the reverse charge mechanism on the supply of telecommunication services (= TC supplies), as intended by the legislator. By taking these steps, the legislator intends to curb fraud models. However, the new regulation only applies to TC supplies rendered to a taxable person who himself is a reseller of TC supplies. Companies that buy and/or sell TC supplies must adapt their internal processes and systems accordingly, for both purchases and sales. Meanwhile, a number of unresolved questions and considerable difficulties in application are emerging. The legislator would do well to rework and improve the regulation.
In the ninth part of our KMLZ Newsletter series on the Annual Tax Act 2020 we present the innovations concerning the VAT exemptions for supplies to the armed forces. In its currently valid version, the VAT Act provides for VAT exemptions for supplies rendered to NATO troops in accordance with sec. 4 no. 7 letters a and b of the German VAT Act. In addition, there is also a tax exemption based on the NATO Status of Forces Agreement, which is independent of the VAT Act. A VAT exemption for troops of EU Member States and military EU missions has not previously existed.
