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.
On 21 June 2018 the US Supreme Court ruled that out-of-state retailers must charge and remit sales tax, even if they do not have a physical nexus in the customer’s US State. It thereby confirmed the economic nexus legislation introduced by South Dakota. Furthermore, the court’s decision effectively overturns contrary earlier rulings. Other US States will follow South Dakota’s example. US and non-US online sellers with customers in the US must now check whether they are affected.
AUSTRALIA plans to tax non-established providers of hotel rooms +++ GREAT BRITAIN intends to simplify input VAT deduction of import VAT +++ GREECE is about to introduce real-time reporting obligations and plans to ban paper invoices +++ HUNGARY unofficially grants grace period for real-time reporting +++ INDIA intends to simplify VAT returns +++ ITALY postpones the obligation to issue electronic invoices +++ KUWAIT schedules the introduction of a VAT system for 2021 +++ MALAYSIA abolished GST +++ NEW ZEALAND plans to abolish the exemption limit for imports +++ RUSSIA reduces the exemption threshold for imports +++ SWITZERLAND publishes broadcasting fees +++ SPAIN expands real-time reporting obligations
In its decision of 25.04.2018, the Federal Fiscal Court’s 9th Senate voiced “serious doubts” as regards the constitutionality of the interest rate charged on tax arrears. The Federal Ministry of Finance’s now instructs tax offices to grant the suspension of the execution for all interest assessments which are based on sec 238 General Fiscal Code. However, this only applies for interest periods as of April 2015. Moreover, taxpayers must first appeal against the interest assessment and apply for the suspension.
In practice, the time a supply takes place, is one of the most common pieces of mandatory information missing from invoices. According to the latest Federal Fiscal Court case law (decision of 01.03.2018, V R 18/17), this missing information may be concluded from the date of issue of the invoice. The prerequisite for this is that according to the circumstances of the respective case, it can be expected that the supply was rendered in the month the invoice was issued.
Input VAT deduction from advance payments is part of a taxable person’s daily business. Where the supply does not take place, input VAT deduction can only be denied if the payer, at the time of the payment on account, knew or reasonably should have known that the supply was uncertain (judgement of 31.05.2018, C-660/16 and C-661/16, Kollroß und Wirtl). If the payer only acquires this knowledge later, he must adjust the deduction of input VAT only in circumstances where he recoups the advance payment from the contracting party.
In its letter of 23.04.2018, the Federal Ministry of Finance withdrew the so called “French Fries Decree”. Until very recently, a supplier established somewhere in the Community territory outside Germany could, under certain circumstances, invoice its German customers with German VAT, even where the recipient of the goods was already known at the beginning of the transport in the country of departure. The Federal Ministry of Finance has cited the avoidance of the risk of tax losses as the reason for the change, which applies to all open cases. The Federal Ministry of Finance has granted German customers a transitional period until 31.12.2018 for deducting input tax.