The current ECJ judgment in the legal case baumgarten sports & more GmbH is a welcome relief for taxable persons as regards transactions involving payment by instalments (ECJ, judgment of 29.11.2018 – C-548/17). Even if taxable persons are subject to taxation based on agreed consideration, they will, in the future, be able to avoid having to pay VAT en bloc to the tax office at the time the (first) supply is rendered. Therefore, under certain conditions, the supplying taxable person will no longer have to pre-finance VAT in the case of such transactions.
The "German Annual Tax Act 2018" was passed by the Bundesrat on 23.11.2018. The following changes apply to VAT: Recording obligations and liability for electronic marketplaces are introduced. The law regulates, for the very first time, the taxation of vouchers. The definition of taxable amount is adapted to the VAT Directive. Finally, the Act contains three simplifications for electronic services, as well as for telecommunications and broadcasting services.
In its current judgment Vădan (judgment of 21.11.2018 – C-664/16) the ECJ states, for the first time, that the submission of invoices is not a mandatory requirement for the deduction of input VAT. The strict application of the requirement to produce invoices would conflict with the principles of neutrality and proportionality. Hence, taxable persons can also claim input VAT deduction if they are able to prove the necessary (substantive) requirements by means of objective evidence. Taxable persons that were denied the right to deduct input VAT by the tax authorities, due to a lack of invoices, should now (re-)examine whether they can provide objective evidence by other means.
Numerous legal questions exist concerning the settlement of past property developer cases. The German Federal Fiscal Court recently ruled on one of these issues: A property developer's claim for a VAT refund is not dependent upon whether he has paid the tax amount to the supplier or whether the tax authority can offset it. The findings of the German Federal Fiscal Court are not only positive for property developers but also other business sectors, such as purchasing associations, who could benefit.
With its most recent referral to the ECJ, the German Federal Fiscal Court (decision of 02.08.2018 – V R 33/17) opens the discussion as to what extent VAT rate reductions are applicable beyond their wording, even if (only) comparable services are rendered. In this context, the Federal Fiscal Court refers to the principle of equal treatment pursuant to Art. 20 of the Charter of Fundamental Rights of the EU. The future scope of the application of the reduced VAT rate could thus be significantly extended. Entrepreneurs should closely follow the further proceedings of the referral. In certain cases, it may now already be recommendable to examine the question of the applicability of a reduced VAT rate.
The tax authorities and tax courts generally deny input VAT deduction from procured consulting services for sales of shares not subject to VAT. In its judgment of 8 November 2018, in the case C&D Foods Aquisitions ApS (C-502/17), the ECJ reminds us that this does not always apply. If the sale of shares serves the economic activity of the taxable person or expands it, an input VAT deduction can be considered. This principle should also apply to other asset transfers not subject to VAT, e.g. supplies of real estate.
With a further ruling, the Federal Fiscal Court has clarified its case law on the transfer of a going concern. In the disputed case, only the inventory was sold. The business premises were not included. The Federal Fiscal Court was required to deal with the question of whether the isolated sale of the inventory constituted the transfer of a going concern, and was therefore outside the scope of VAT.
The Federal Fiscal Court confirms the ECJ’s decision in the legal case Stadium Amsterdam, according to which a partial application of a reduced VAT rate in the case of a single supply is found to be out of the question.
The Federal Ministry of Finance has extended the transitional phase for the VAT treatment of supplies via stocks until 31.12.2019. Hence, companies affected by this change have gained further time and presumably will only have to deal with this issue as 2020 approaches. Quick Fixes containing an EU-wide simplification rule for consignment stocks will then be implemented.
The 8th Senate of the German Federal Fiscal Court has joined the 9th Senate. It also voiced serious doubts that the interest rate of 6% p.a. in sec 238 para 1 of the German General Fiscal Code is constitutional. According to the 8th Senate, this has even applied since (November) 2012. The German Federal Constitutional Court plans to decide on this question before the end of the year. Until then, taxpayers should appeal against all interest assessments and apply for suspension of enforcement.