If a taxable person’s invoice shows an amount of VAT that is too high, he is liable for the payment of the inflated amount in accordance with sec 14c para 1 sentence 1 of the German VAT Act. If the taxable person wants to eliminate the tax liability, according to sec 14c para 1 sentence 2 of the German VAT Act, he must correct the invoice. The Federal Ministry of Finance has now tightened the requirements for eliminating such VAT liability: It now additionally requires the supplier to repay the already collected additional VAT amount to the recipient.
The ECJ softens the right to deduct VAT in the case Sveda. Taxable persons may now even deduct VAT in the case of the free use of capital goods. The judgment also comments on the question of whether and how taxable persons are entitled to deduct VAT in the case of grants. It is not only non-profit organizations that will benefit from this case law. The decision may also have an impact on the input VAT deduction of holding companies.
In the Federal Fiscal Court’s opinion, supplies by carers may be tax-free even if they are not regarded as “recognized organizations“. The Federal Fiscal Court specifically referred to the nursing crisis in Germany. The Court stated that such tax-free services are not only in the public interest, but are also in accordance with the principle of equal treatment.
In a decision which had been given little attention up to now, the Federal Fiscal Court tightened the requirements for the deduction of input VAT from invoices. The Court held that taxable persons cannot deduct input VAT from invoices only showing the supplier’s P.O. box address. In this context, the Federal Fiscal Court indicated that this reasoning is also applicable in cases where the P.O. box address of the recipient of the supply is stated on the invoice. The judgement may have far-reaching effects, in particular for German companies.
A few months ago, the Wage Tax regulations for company events and small gifts were changed. This change impacts on VAT. The Federal Ministry of Finance has now given its opinion on this issue. It is no surprise that the Wage Tax regulations may not be fully applied with respect to VAT. In principle, the regulations for Wage Tax are applicable for the VAT treatment for simplification purposes. However, there are also substantial differences between these two types of taxes. In particular, there is no identical treatment if the costs for a company event exceed the value of 110 € per participant.
In a decision of 18 June 2015, the tax court Niedersachsen (Lower Saxony) expressed its disagreement with the tax authorities‘ opinion regarding consignment stocks (case no. 5 K 335/14). The case concerned supplies from the EU to a call-off stock in Germany. The tax court decided that the respective contractual agreements of the parties are essential for the VAT treatment. It is yet to be determined whether an unconditional purchase agreement had already been put in place prior to the goods being shipped to the warehouse. It is now evident that companies may not rely on the rules for consignment stocks as contained in the German VAT Circular. Both, suppliers and customers need to carefully check what is agreed in terms of their consignment stock contracts.
Taxable persons who wish to carry out a zero-rated intra-Community supply of goods must provide proof thereof. Basically, the proof has to be formal in nature, specifically documentary and accounting evidence. In the Federal Fiscal Court’s view (judgment of 19 March 2015 – V R 14/14) evidence provided by a witness is accepted only in exceptional cases. Above all, this decision will have an impact on legal disputes.
The Federal Fiscal Court expressed doubts that a management holding company could be entitled to fully deduct input VAT. This is based on the assumption that the supplies purchased are partly connected with the acquisition and holding of shares in the subsidiary companies which is not to be regarded as an economic activity. This is contradicted by the ECJ. The ECJ acknowledges that there is a right to fully deduct input VAT if the holding is involved in the subsidiary’s management and is thus rendering supplies subject to VAT. The ECJ has repeatedly confirmed the principle that costs, which occurred in connection with the acquisition of shares in subsidiary companies, are always deemed to be part of the general expenses. It is therefore not necessary to prove that the expenses are part of the cost elements of the output transactions subject to VAT. The ECJ does not, however, comment on the Federal Fiscal Court’s questions on the calculation method as regards input VAT deduction in the case of mixed holdings.
According to German law, only legal persons may function as controlled companies. It is also required that the controlled company is subordinate to the controlling company in financial, economic and organizational terms. Now, the ECJ has turned the previous understanding upside down: National law does not correspond with Union law. Furthermore, the previous understanding of the existence of a VAT group by the Federal Fiscal Court was too restrictive. The most important question now is: How can entrepreneurs benefit from this new interpretation of the law?
Taxable persons are in need of a proper proof of export for zero-rated export supplies of goods. To date, the only admissible proof of export for export declarations filed electronically (via ATLAS), has been an electronic confirmation of export. However, on 19 June 2015 the German Federal Ministry of Finance issued a circular, commenting on the preconditions on the basis of which the German tax authorities will accept, for VAT purposes, an electronic proof of export issued by customs authorities of another EU member state.