Due to the accession to the EU, entrepreneurs having business relations with Croatia will need to make changes to the individual settings in their SAP systems. From now on, business transactions will have to be treated differently in VAT matters. These changes will have to be implemented accordingly with regard to the customer’s settings, using the correct tax codes and the invoice layouts as well as VAT reports, EC-Sales lists and Intrastat declarations.
In its latest judgment, the European Court of Justice (ECJ) comments on the legal case Petroma Transports and others regarding the question of VAT deduction following an invoice correction. According to the ECJ’s statements, invoice corrections have to be transmitted to the responsible tax office before decisions on denying VAT deduction are being made. It could be interpreted that VAT deduction with retroactive effect should be pos-sible. Therefore, entrepreneurs are forced to take action by having invoices corrected properly and quickly as well as transmitting the corrected invoices to the tax authorities in time.
Croatia will become the 28th member state of the European Union on 1 July 2013. As from the date of accession Croatia has to implement the common VAT system of the EU. As a result of the upcoming changes, the businesses trading with Croatia need to adjust their processes.
In its decision of 18 February 2013, the Federal Fiscal Court had to decide on an issue that appears frequently in advisory business: The tax authorities denied VAT deduction for goods purchased by the complainant K by arguing the goods were part of a VAT fraud. Although K explicitly referred to the European Court of Justice’s (ECJ) latest jurisdiction regarding VAT deduction, the Federal Fiscal Court was not able to directly refer to this issue due to K’s failures in the previous instances
On 20 March 2013, the German Ministry of Finance released the long awaited circular regarding the taxation of food and drinks. The circular starts by providing general information about when the reduced VAT rate of 7% will apply and subsequently goes on to give 16 examples, with a view to assisting the understanding of what is involved. The applicable VAT rate depends on the specific details of each of the sales processes. Entrepreneurs should take this into consideration when organizing the sale process.
On 7 March 2013, the German Ministry of Finance passed the long awaited administrative circular on VAT groups. The tax authority has changed its opinion on the characteristics of organizational links. The new principles will apply from 01 January 2014. Companies should therefore make use of the transitional period and check whether they comply with the requirements for a VAT group.
In its judgment of 14 November 2012, (file no. XI R 8/11), the Supreme Tax Court ruled that there will be no VAT-exemption if there is no statement on the invoice that the supply is a VAT-exempt intra-Community supply.
By judgment of 21 February 2013, case C-18/12 – Zambek – the European Court of Justice (ECJ) ruled that entrance tickets for open-air swimming pools and water parks (aqua parks) are VAT-exempt. This judgment is of particular significance for the German legislature. It allows for more scope in the future and maybe even into the past.
On 31 January 2013 the European Court of Justice has passed two more judgments in cases regarding legitimate expectation when deducting VAT. Principally, the customer has the right to deduct VAT even if the tax authority assumes that the supplier has not carried out any supply. If the tax authority wants to deny the deduction of VAT, even in such cases it is for the tax authority to prove that the customer knew or should have known about a tax fraud related to the supply.
The Supreme Tax Court’s V and XI Senate currently hold diverging views on VAT deduction by shareholders. While the XI Senate construes the European Court of Justice’s statements in the case of Polski Trawertyn quite widely, thereby making VAT deduction easier, the V Senate adheres to its restrictive interpretation. The European Court of Justice will have to clarify these interpretation issues.