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.
The settlement of past property developer cases is in full swing. The additional claim of VAT due from the supplier of construction work, as well as the granting of legitimate expectations, are being controversially discussed. The tax court Berlin-Brandenburg was the first to comment on this issue, when it granted legitimate expectation to the supplier. It is seriously doubtful whether sec. 27 para. 19 sentence 2 of the German VAT Act, which excludes legitimate expectation, is compatible with the German Constitution and European law.
VAT refund applications made by taxable persons established in a third country must be filed within six months following the end of the respective calendar year. Applications for 2014 have to be filed by 30 June 2015, at the latest. Applicants have to ensure that their applications are complete. In the last few months, some significant judgments concerning this issue have been handed down.
A number of different supplies can be regarded as constituting a single supply. However, in principle, every supply must normally be regarded as being distinct and independent. The differentiation proves difficult in practice. The criteria are ambiguous. Fortunately, the ECJ has made clear statements regarding supplies associated with the letting of immovable property. Utility providers, landlords and tenants should check whether the charging of utilities practiced to date meets the criteria provided by the ECJ. In addition, the ECJ has concretized the principles of its decision in the case of Auto Lease Holland. Companies confronted with problems arising from the Auto Lease Holland case will have more legal certainty. Nevertheless, they should check whether their current practice is in conformity with the new ECJ principles.
The effectiveness of a voluntary self-disclosure depends on the payment of a surcharge; even from evasion amounts of as little as EUR 25,000. The legislature has, as from 1 January 2015, once again increased the amount to be paid. According to the fiscal authorities, the surcharge is to be paid, in full, by each accomplice. It is irrelevant whether the accomplice has gained a personal benefit from the act of evasion. Furthermore, VAT liability and input VAT deduction are not offset for the purposes of the assessment of the surcharge. For this reason, a heavy penalty might be due, even if there is no burden of payment from a VAT perspective.
There are new criteria regarding chain transactions. For determining the supply, to which the transport is ascribed, it is decisive when the second person acquiring the goods receives the power to dispose of the goods. This also applies if the second person acquiring the goods transports or dispatches the goods. Therefore, the transportation order, which the German legal practice has always referred to, loses its importance. All chain transactions must be thoroughly checked.
Curative treatment supplied by dentists is VAT exempt. This VAT exemption however is not applicable to the supply of dental prostheses in Germany. Such supplies are subject to German VAT. Dentists are not permitted to deduct input VAT from the purchase of dental prostheses that are used by the dentists for their supplies of VAT exempt services. The ECJ has decided that this is also applicable for intra-Community acquisitions of dental prostheses in Germany. Accordingly, dentists are often required to pay VAT without being entitled to deduct input VAT. Likewise, the supply of dental prostheses by denturists is subject to German VAT
Sec. 2 para. 2 no. 2 of the German VAT Act regarding the requirements for a consolidated VAT group is formulated more restrictively than the underlying art. 11 of the VAT Directive. Therefore, entrepreneurs often refer to the EU law which is, in many cases, often more favorable for them. Although the tax court Saarland rejected the direct application of art. 11 of the VAT Directive in the particular case, entrepreneurs should continue to refer to this regulation until the Federal Fiscal Court clarifies this issue.
If the requirements, according to the wording of a national VAT exemption regulation, of sec. 4 of the German VAT Act are not met, VAT exemptions will usually be denied by the German tax authorities. The European law is not taken into consideration. The Federal Court of Finance repeatedly directly applied a VAT Directive tax exemption regulation, in this case to supplies carried out by private hospitals. Supplies carried out by private hospitals are not subject to VAT, independent of their certification with respect to social security law.