The recent EU level failure of the project to introduce a European-wide digital services tax has resulted in France being the first European country to draw up a bill for a national digital services tax. German companies may also be affected by this tax, the introduction of which is planned, with retroactive effect, as of 01.01.2019. Other EU Member States may now also feel compelled to introduce a national digital services tax. In addition, the French draft law is likely to influence the debate on a global digital services tax at G7, G20 and OECD level.
In the legal case A & G Fahrschul-Akademie (C-449/17), the ECJ denied VAT-exemption for driving lessons. Here, the court interpreted the requirements for exempted supplies of commercial education services in accordance with Art. 132 para 1 (i) and (j) of the VAT Directive more strictly than before. The decision is therefore important not only for the driving school sector but for all providers of commercial educational service supplies.
It could be that Brexit will take place in less than 2 weeks. It is also possible that Great Britain’s departure from the EU will be an unregulated one. The British legislator has therefore made initial preparations to ensure that a functioning VAT law will continue to exist as from 30.03.2019 in the instance of this worst-case scenario. Unfortunately, many issues, especially for foreign taxable persons, remain unresolved.
According to Art. 53 of the VAT Directive, the place of a supply of services, in terms of admission to events supplied to a taxable person, is the place where those events actually take place. However, the question remains as to which type of events are covered by this rule. The ECJ dealt with this in the case Srf konsulterna, which concerned courses for accounting, management and payroll consultants. Unsurprisingly, the ECJ favoured a rather broad interpretation. The extensive statements of the Advocate General regarding this case are also of particular interest. The German tax authorities may take this opportunity to adjust the relevant explanations as contained in the German VAT Circular.
Brexit continues to cast a long shadow into the future. Even from a VAT perspective, countless details have yet to be clarified. The German Federal Central Tax Office has therefore published two information letters. One letter is directed at German companies and one is for British companies. These letters contain explanations regarding the special issues to be taken into account when applying for input VAT refunds for 2018 and 2019 in the event of a hard Brexit as of 30 March 2019.
After concluding a so-called gross price agreement, parties sometimes recognise that the supply is VAT-exempt. Normally these kinds of agreements do not allow for the recovery of VAT. On 20.02.2019, the Federal Court of Justice decided that such civil law claims may, sometimes, exist. A case’s chances of success, however, rest on its individual facts. Cases with a chance of success will be those where the views of the tax authorities, applicable at the time the contract was concluded, are subsequently regarded as being incorrect. The Federal Fiscal Court decided, in 2014, that the sale of patient customized cytostatic drugs by a hospital pharmacy, as part of its outpatient hospital treatments, is VAT-exempt.
The Federal Ministry of Finance does not raise complaints until 15.04.2019, provided that marketplace operators have at least received their online retailers’ applications submitted by 28.02.2019 for the issuance of registration certificates.
Most recently, the ECJ and the Federal Fiscal Court clarified that success-dependent remunerations paid for participating in competitions are not subject to VAT. In a recent Federal Fiscal Court decision of 25.07.2018 (XI B 103/17) this newer case-law is confirmed. The fact that, in addition to the activity associated with uncertainties, there is a further, definite activity, does not lead to the success payment being subject to VAT. When concluding contracts for success-dependent remuneration, it is important to check to which activities relevant payments relate and at what point in time any uncertainty about such payments exists. If there is uncertainty, at the point in time the supply of service is rendered, whether or not a payment will be made, the transaction is not subject to VAT.
The Federal Fiscal Court has made a landmark decision on communities of part owners: From a VAT perspective, communities of part owners no longer exist. Consequently, the “mystery” associated with communities of part owners lives on. Our newsletter advises you about the practical consequences of this decision and why it falls back to the tax authority to impose Federal Fiscal Court decisions with non-application decrees
The German Ministry of Finance provides comprehensive comments on the new regulations regarding the liability of operators of electronic marketplaces. Unfortunately, a number of practical issues that are relevant to marketplace operators remain unanswered.