VAT claims are often accompanied by both an assessment of interest, pursuant to sec 233a German General Fiscal Code, as well as late payment penalties, pursuant to sec 240 German General Fiscal Code. With regard to the interest rate, constitutional doubts are currently being raised (see KMLZ Newsletter 25/2018). The Fiscal Court Munich has now also expressed these same doubts regarding late payment penalties in circumstances where the taxpayer is over-indebted and insolvent for periods dating from 2015 (decision of 13.08.2018 – 14 V 736/18). In such cases, the late payment penalties are to be entirely waived. Accordingly, a managing director cannot be held liable.
In an invoice issued for the purpose of input VAT deduction, the supplier’s address is not required to be the place of his or her economic activity. This was decided by the German Federal Fiscal Court in two judgments of 21 June 2018 (V R 25/15 and V R 28/16). The German Federal Fiscal Court thus follows the ECJ in the German rulings in Geissel and Butin – C-374/16 and C-375/16. It is sufficient if the supplier can be reached at the given address. It is also sufficient, for example, to provide the address of a law firm which is also the domicile of other companies. Moreover, the fact that there is a domicile address of the supplier does not justify accusations of bad faith on the part of the recipient. Despite VAT fraud in the supply chain, the German Federal Fiscal Court granted input VAT deduction in the proceedings V R 28/16. The tax office is required to prove knowledge of tax evasion or knowledge of facts which should have alerted the recipient to the existence thereof, which was not the case here.
According to a recent Federal Fiscal Court decision (XI R 16/16 of 25.04.2018), with regard to commissionaire structures personal VAT-exemptions also apply to the procurement of services by the undisclosed agent. Thus, the Federal Fiscal Court contradicts the fiscal authority’s current view. The decision results in changes, which will apply to all undisclosed agents procuring VAT-exempt supplies. They now need to check whether they are required to invoice without VAT in the future and whether VAT refunds can be applied for past transactions.
According to the Federal Fiscal Court, (decision of 16.05.2018 – XI R 28/16), any correction of VAT liability in accordance with sec 14c para 1 sentence 2 of the German VAT Act (= sec. 203 of the VAT Directive) requires, in addition to the correction of the invoice, that the supplier has paid back the wrongfully invoiced VAT amount to the customer. In the absence of such a repayment, the supplier would be unjustly enriched. For taxable persons this means that they often have to pre-finance the respective VAT amount. Further, they may declare the correction of their VAT liability to the tax office only during the reporting period of the repayment not earlier. However, there are still likely to be constellations where a repayment to the customer is irrelevant.
In its judgement of 25.07.2018 in the legal case C-140/17 the ECJ ruled that a municipality can become entitled to input VAT deduction by virtue of a subsequent allocation decision. According to the ECJ, an input VAT correction is not ruled out merely because the public body used an asset exclusively on behalf of the government at the time of its acquisition. The ruling gives hope to both public and private bodies that the previous static allocation of assets to the non-economic sector, at the time of their acquisition, will ultimately become a thing of the past.
Operators of electronic marketplaces shall be held liable for the VAT owed by other companies who used the marketplace to sell goods in Germany without paying VAT. According to the government's draft of the law to avoid VAT shortfalls on the trade with goods on the Internet, operators are to be encouraged to cooperate only with companies who can prove they are registered in Germany. Otherwise the operators may be held liable for the VAT not paid.
In its judgment of 25.07.2018 (C-05/17) the ECJ decided that a service provider does not provide VAT-exempt payment and transfer transactions by the mere act of direct debiting and forwarding of money. This case is yet another ECJ ruling which finds that outsourced financial service supplies are subject to VAT. Cost advantages are nullified by VAT liability in this area for certain sectors like banks, insurance companies and doctors.
The Fiscal Court in Hesse dealt with the issue of absorption of employee relocation expenses by employers in a judgement published in July 2018 (6 K 2033/15 of 22.02.2018). In the particular case, the Court held that the employer’s business interest in the move took priority. Thus, there is no free of charge supply here. Consequently, the absorption of relocation expenses by an employer can justify a claim for the company’s input VAT deduction. The Court considered the assumption of an exchange-like transaction as unrealistic
In the Enteco Baltic case, the ECJ once again examined the significance of VAT-ID-Nos. for the application of a VAT exemption. On this occasion, it concerned the exemption from import VAT in case of a subsequent intra-Community supply (so-called “procedure 42”). In consistent continuation of its previous case law, the ECJ ruled that the disclosure of the purchaser's VAT-ID-No. is merely a formal requirement and not a substantive prerequisite for exemption from import VAT. In addition, the judgment contains statements on good faith and evidential value of documents issued in the excise tax suspension procedure.
On 05.07.2018 the European Court of Justice ruled in the case Marle Participations - C-320/17 that a holding company is generally entitled to fully deduct input VAT from costs in connection with the acquisition of shares in its subsidiaries. The prerequisite is that the holding company intervenes in the management of its subsidiaries and, to this extent, carries out an economic activity. A holding company is already regarded as carrying out an economic activity when it provides rental services subject to VAT to its subsidiaries.