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.
With effect from 1 January 2015, all EU member states will amend their place of supply rules for telecommunication broadcasting and electronic services rendered to non-taxable persons and implement the Mini One-Stop Shop. To compensate for the resulting loss of revenue, Luxembourg intends to realize its plans to increase its VAT rates. Further changes to VAT rates in other countries are exceptional. The fight against VAT fraud remains the most predominant topic. Thus, the scope of the reverse charge scheme will be broadened in some EU member states. Entrepreneurs doing business in other countries should check whether the changes may impact upon them.
The tax court Niedersachsen referred to the ECJ the question of whether and, if so how, the correction of invoices can be carried out retroactively. If a VAT deduction is denied vis-à-vis the faulty invoice and is granted for the corrected invoice, it would be a “zero-sum game” if it were not for the additional late payment interest in the amount of 6%. However, interest payments would be omitted if a retroactive correction of the invoice was permitted.
The Federal Fiscal Court has ruled that installed operating equipment is not immovable property. This is the case irrespective of whether it is constantly affixed to the property or not. In the case at hand, the court was faced with making a decision concerning the reverse charge scheme in the construction sector. However, it also came to a number of general conclusions that may be relevant for the definition of services connected to immovable property. The German Administrative Circular will have to be amended accordingly. Companies performing and receiving supplies related to machines and equipment will have to review the VAT treatment and amend said treatment, if need be.
The last recipient in a supply chain is not obliged to correct his input VAT deduction if he receives rebates from a manufacturer not resident in Germany. This is based on a judgment of the German Federal Fiscal Court. However, what is not yet decided is the reverse: Is it possible that the manufacturer resident in Germany corrects his output VAT if he grants rebates directly to the last recipient not resident in Germany and if VAT is due for the supply of goods to his customer in Germany?
If a taxable person supplies services, within the meaning of sec. 3a para. 2 of the German VAT Act (Art. 44 of the VAT Directive), to a fixed establishment of another taxable person, the place of supply shall be where the fixed establishment is set up. Determining the existence of a fixed establishment is not always straight forward, especially in cases where the recipient uses external human and technical resources. In the recent legal case of Welmory, the ECJ was tasked with deciding this question. In the ECJ's opinion, even in a case like this, a fixed establishment may possibly exist.
Until now VAT refund applications made by taxable persons established in a third country had to be personally signed. The European Commission is now seeking to change this by referring Germany to court. Non-EU-operators whose VAT refund applications were rejected, due to the missing personal signature, should file an appeal and apply for suspension of proceedings.
The Ministry of Finance published a circular dated 26 September 2014 regarding the amendments to the German VAT Act by the Act for the adjustment of national tax law resulting from the EU accession of Croatia (Croatia Act). This Act came into force on 1 October 2014. The most important change refers to the reverse charge scheme acc. to sec. 13b of the German VAT Act regarding construction work, the supply of tablet computers, game consoles and metal. Along with some clarifying instructions, this circular includes, an interim regulation for supplies rendered before 1January 2015.
To date, supplies carried out in the form of services between a company’s head office and its foreign fixed establishment, have been treated as non-taxable supplies. The principle of unity of the taxable person even applied internationally. The ECJ has now restricted this principle. The reverse-charge-system may apply if the foreign establishment belongs to a VAT group in another country.
The fiscal authorities are increasing their focus on VAT fraud by means of an information leaflet setting out 40 warning signs which is being distributed to selected en-trepreneurs. In this information leaflet, the fiscal authori-ties have listed numerous circumstances which they consider to be suspicious as regards fraudulent VAT activities and which entrepreneurs have to take into consideration when initiating business transactions. According to the fiscal authorities, if these warning signals are ignored this might suggest involvement in fraudulent VAT activities and lead to the refusal of VAT deduction or tax exemption of intra-Community supplies.