The Federal Ministry of Finance has comprehensively reviewed the 1995 GoBS and the 2001 GDPdU. Both have now been amended and merged into one document, namely the GoBD (principles of duly keeping and retaining books, records and documents in electronic form as well as regarding data access). The review was overdue. What is new here is that the GoBD noticeably refers to VAT. In light of the above and due to the growing significance of complete and effective tax compliance, companies should check the impact of the new GoBD on their internal VAT related processes.
Based on new case law, an intermediary is no longer entitled to reduce his output VAT if he refunds to the customer of the transaction procured by him part of the transaction price. The German Ministry of Finance issued a circular confirming this opinion on 27 February 2015. This circular will have a great impact on many agents e.g. of telephone contracts, car dealers, purchasing associations and travel agents. The concerned companies will have little time to amend their structures and their invoicing procedure.
Fiscal authorities often refuse the tax exemption for intra-community supplies of goods arguing that the taxable persons would have been acting in bad faith due to their involvement in perpetrating a tax fraud. In the present proceedings before the Federal Fiscal Court, the fiscal authorities presented, in their view, extensive incriminating evidence, including evidence of the particular company being run as a dummy company, demonstrating a neglected duty of care.
The last recipient in a supply chain is not obliged to correct his input VAT deduction when he receives rebates from the first supplier in the chain from abroad. The German Federal Fiscal Court confirmed this with its judgment of 4 December 2014 (V R 6/13). In such cases, the taxable base for a turnover subject to VAT has not changed. Furthermore, the tax court stated that, in these sorts of cases, the distributor is not obliged to correct his intra-Community acquisitions. As a consequence, it is more profitable to receive rebates from abroad than from a German supplier.
It has been discussed for quite some time now if and how non-taxable grants may affect the deductible proportion of input VAT. Proceedings before the Federal Fiscal Court have already shown that taxable persons need to participate at an early stage. If they do not, the amount of input VAT may be estimated and grants may be considered negatively. However, taxable persons are in the position to avoid such unpleasant surprises.
The law on amendment of the German Fiscal Code to match the Customs Code of the European Union and the amendment of further tax provisions (ZollkodexAnpG) dated 30 December 2014 also serves to amend the German VAT Act. In addition to minor changes, the Federal Ministry of Finance is authorized to extend the scope of the reverse charge mechanism by statutory instrument within the scope of the Quick Reaction Mechanism. The law also restricts the reverse charge mechanism as regards metals. The German legislature has amended the recent extension which came into effect on 1 October 2014 (so-called Croatia Act).
Since 1 January 2015, the right to voluntary disclosure has been substantially tightened by extending the period of adjustment up to 10 years as well as by increasing penalties in accordance with sec. 398a of the German General Fiscal Code. There is relief regarding VAT as the previous legal situation is partially set back to resemble the situation prior to the coming into force of the Illegal Earnings Combat Act. It is now once again possible to make several corrections regarding monthly VAT returns. However, this does not apply to annual VAT returns.
The tax authorities often deny VAT deduction by saying the entrepreneur received the goods from a “defaulting trader”. Currently, the legal concept of good faith is of no importance in the assessment procedure. However, according to the latest decisions by the Federal Fiscal Court, this might be viewed differently in the future. In tax disputes, the question as to who actually bears the burden of proof regarding good faith will need to be determined.
On 1 January 2015 the Hungarian tax authorities will introduce an electronic system designed to monitor the transportation of goods sent via truck (EKAER). Once again, VAT-registered companies in Hungary are facing additional administrative burdens which are unique within Europe. The EKAER-System requires all truck-transported goods to be reported in advance. Failing the reporting obligation will lead to default penalties of up to 40 percent of the goods’ value or even seizure of the goods. VAT-registered companies in Hungary should immediately verify to what extent the introduction of the EKAER-System affects their business activities.
By means of its Circular dated 5 December 2014, the German Ministry of Finance has extended the interim regulation for the application of the new legal position for the supply of metal until 30 June 2015. According to this regulation, the tax authorities will not object if both parties to a supply of metal have mutually agreed that the supplier is liable for VAT. Furthermore, the legislature intends to amend the VAT Act. The list of goods concerned will be reduced. Besides that a threshold of EUR 5,000 will be implemented.