A number of credit institutions calculate their deductible proportion of input VAT using the so-called Philipowski method. Recently, the Munich Tax Court found this method of calculating the deductible proportion of input VAT not to be appropriate. The Federal Fiscal Court has now confirmed this decision. Nevertheless, the following still applies: Every taxable person with partly taxable and partly VAT exempt output transactions can estimate its own deductible proportion of input VAT. If this estimate is appropriate, the tax authorities must accept it.
The Finance Court of Lower Saxony has established that a VAT group also extends to cover the non-economic activity of the controlling company. This means that supplies of services of a controlled company to the non-economic part of its controlling company are not subject to VAT. Furthermore, these transactions cannot be classified as supplies free of charge that are deemed to be subject to VAT. The judgement is not only relevant for the public sector, but also for non-profit institutions and mixed holdings.
The German Federal Ministry of Finance has redefined the principles for the classification of rental and leasing contracts from a VAT perspective. In doing so, it has abandoned the reference to income tax law. In future, two aspects in particular will have to be anchored in rental and leasing contracts. Entrepreneurs should now review existing contracts. New rental and leasing contracts offer potential for design.
The coronavirus SARS-CoV-2 continues to hold the world firmly within its grip. New restrictions are being announced almost daily to contain the spread of the virus. Increasingly, new measures are being introduced to cushion the economic consequences. In Europe, every country has now put together an emergency package. These packages usually include measures in the area of VAT, which are aimed at improving the liquidity of companies. This newsletter provides you with an updated and comprehensive overview of what is happening.
The restrictions being put in place due to the coronavirus are increasing, both in Germany and abroad. It is foreseeable that very many companies will experience severe economic difficulties as a result. The German tax authorities are attempting to mitigate the consequences through various measures, in particular by helping companies to obtain liquidity. This newsletter is intended to provide a brief, up-to-date overview of which measures concerning VAT have been announced and initiated.
Structures in VAT are not common. In the recent case before the Tax Court in Lower Saxony, the parties involved tried to obtain input VAT deduction by contributing the input supplies to the subsidiary company as shareholder contributions free of charge. Is this the new "pull a rabbit out of a hat trick" in VAT law set up with a view to undermining the rules for input VAT deduction?
The Coronavirus is spreading rapidly within the EU. In addition to restrictions on public life, companies in many EU member states are also struggling as a result of the virus. The national tax authorities are attempting to help affected companies by means of simplifications, extensions of deadlines and tax deferrals, all with a view to alleviating the negative effects of the Coronavirus. This newsletter provides an overview about the current situation.
In the case of private hospitals, the question of which criteria are to be applied in order to assess whether medical treatment supplies provided until the end of 2019 are VAT exempt remains in dispute. Since last year’s judgement of the German Federal Fiscal Court, special emphasis has been placed on examining the "economic efficiency" as defined by social law. This is the first time that a German fiscal court has dealt with this criterion. The ECJ has commented on the aspect of partial reimbursement of costs by social security institutions. A new legal situation will apply for the financial year 2020.
With its decision of 27.11.2019 (V R 23/19), the Federal Fiscal Court ruled that the activity of a supervisory board member, who receives fixed remuneration without variable remuneration components, is not a taxable person for VAT purposes. In the Federal Fiscal Court’s view, the supervisory board member did not bear any economic risk associated with his activity and therefore, did not provide any services subject to VAT.
The judgment should be transferable to limited liability companies, foundations, advisory boards and comparable supervisory bodies, and possibly also to management boards. The Federal Fiscal Court left open other case constellations, other than fixed remuneration. The Federal Fiscal Court also ruled that a self-billing invoice showing VAT only constitutes a tax liability in accordance to sec 14c para. 2 of the German VAT Act, if the recipient of the self-billing invoice is a taxable person.
Even in the case of a share deal, a non taxable transfer of a going concern can be given in individual cases. This was recently clarified by the Federal Fiscal Court (BFH, judgement of 18.09.2019 – XI R 33/18). This case concerned a controlling company in a VAT group which transferred 100% of the controlled company’s shares. The Court found that, in these sorts of circumstances, if the acquirer of the shares goes on to establish a VAT group with the acquired company, this constitutes a sale of a going concern. Besides that, also other constellations beyond the VAT group are conceivable in which the sale of 100% of shares can lead to a non taxable transfer of a going concern.