The 9th Senate of the Federal Fiscal Court has voiced “serious doubts” as regards the constitutionality of the interest rate on tax arrears. The rate is 0.5% per month (i.e. 6% per year). The court considers the interest rate to be “unrealistic” and that it violates the general principle of equal treatment pursuant to Art 3 para 1 of the German Constitution. Furthermore, the court regards the interest rate as excessive, thereby infringing Art. 20 para 3 of the German Constitution. As a consequence, taxpayers should appeal against interest assessments on tax arrears and apply for a stay of execution.
Companies receiving travel services have a choice as to whether to apply sec. 25 of the German VAT Act (which violates EU law) or art. 306 ff. of the EU VAT Directive. The German Federal Fiscal Court confirmed this in its judgment of 13.12.2017, which was published on 02.05.2018 (XI R 4/16). This allows companies to choose the most preferable taxation scheme, for themselves and for their customers, who ultimately have to bear the VAT burden. As a result, companies have a maximum degree of flexibility and can theoretically generate non-taxed turnover. This remains applicable until the legislator reacts and adapts sec. 25 of the German VAT Act.
The ECJ has made triangulation supplies easier to carry out through its judgment in the case of Hans Bühler KG (judgment of 19.04.2018 - C-580/16). The simplification rule for triangulation supplies is also applicable if the intermediate is established or registered in the country of departure. This means that businesses could possibly avoid registrations abroad. The situation is to be analyzed against this background and the progress in the relevant countries is to be followed. The ECJ also restricts the importance of the formal requirements, as it views EC Sales Lists, which have not been filed or filed late, as being harmless. This could also apply to other formal requirements, such as invoicing.
In the EU Commission’s view, the existing corporate tax law has failed when it comes to the taxation of revenue generated by the digital economy. An interim tax of 3% on specific online revenues should be levied until the OECD has remedied the situation. Companies with a world-wide revenue exceeding EUR 750 million would be affected. The placing of online advertising, the facilitation of online sales portals and the sale of user data would all be taxed. Thus, the digital service tax would be focused on the USA’s internet giants.
The ECJ repeated in its Biosafe decision (judgment of 12.04.2018 – C-8/17), the reasoning contained in the case Volkswagen AG, namely that a national regulation, regarding a limitation period is not applicable in certain circumstances. Whereas the case Volkswagen AG considered an input VAT refund claim according to Directive 2008/9/EU, the case Biosafe concerned the regular taxation procedure. This decision may also have an impact on the German regulation regarding the Statute of Limitations, sec. 169 ff. German General Fiscal Code.
Member States must pay the total amount of the reim-bursement interest regulated in their legislation. In the view of the European Court of Justice, this also applies if the interest is higher in a particular case than the actual financial disadvantage suffered by the taxpayer (judgment of 28 February 2018 – C-387/16 – Nidera). This decision may impact on the discussion concerning the lawfulness of the German interest on arrears (6% p.a.).
Where a taxable person subsequently invoices VAT in invoices for supplies, which previously he had treated as being VAT exempt, this does not result in the recipient’s input VAT deduction, by means of a VAT refund, being disallowed. Any possible limitation periods are irrelevant in cases where the recipient was unable to claim the refund within time, due to the fact that he did not have an invoice and was unaware of the VAT liability (ECJ, decision of 21.03.2018 - C- 533/16 Volkswagen AG). Here, substantive law prevails over procedural law.
AUSTRALIA introduces distance sales regime +++ BULGARIA clarifies treatment of supplies via consignment stocks +++ FRANCE reduces interest rates for tax arrears +++ GREAT BRITAIN defers Brexit and demands electronic transfer of VAT details +++ ITALY obliges companies to invoice electronically and eases regulations regarding input VAT deduction +++ SWITZERLAND obliges registered companies to declare worldwide turnover and shifts to electronic customs assessments
Unusual constellation – the plaintiff, a taxable person, assumed that it would be liable for undue VAT shown on debit notes. The tax office, however, denied the VAT liability. The Tax Court of Baden-Wurttemberg agreed with the plaintiff (see decision of 11.12.2017 file ref. 9 K 2646/16). It granted approval to cancel the undue VAT shown in the debit notes, a prerequisite for claiming the VAT amount from the tax office. The decision creates significant uncertainty for other taxable persons.
On 27.02.2018 the German Ministry of Finance issued its very first notification regarding the VAT treatment of Bitcoin. Accordingly, the use of Bitcoin is to be treated the same as traditional currencies. Payments with Bitcoin are therefore not taxable. The exchange of Bitcoin into traditional currencies is tax exempt. However, VAT risks arise for online platforms, which allow virtual currencies to be traded via their platform. The tax exemption does not apply to the services provided by the platform. Additional VAT payments might be due.