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.
According to the Federal Fiscal Court, a fixed interest charge of 6% per annum on tax arrears does not violate the general principle of equal treatment or the prohibition of excessiveness. Following sec 233a and sec 238 German Federal Fiscal Code, interest is due if a tax assessment leads to a subsequent payment in respect of an earlier tax assessment. Nevertheless, there is hope: The decision was applied to income tax in 2013. As VAT is based on European law, different stipulations could be applicable to it.
As from 01.01.2018, the new version of sec 4 no 8 lit. h of the German VAT Act applies to the VAT exemption for the management of investment funds. According to this new legal position, the scope of the VAT exemption is broader than it has previously been. In particular, the management of AIFs could be subject to changes. The precise limits are, however, currently unclear. Investment fund managers should keep an eye on the implications of the broader VAT exemption on their input VAT deduction.
To date, it has not been possible to ascribe the transport in a chain transaction in a legally watertight way Hence, the ECJ`s decision in the case Kreuzmayr (C-628/16) has been eagerly awaited. In its decision, the ECJ confirmed that the purchaser’s subjective knowledge (provided that it is supported by objective evidence) must be taken into account but not only that of the supplier. Any stated intention made by an intermediary operator as regards a further sale is therefore irrelevant, even if it could have been assumed following the ECJ decision in the case Toridas (C-68/16). Further, the ECJ denies protection of legitimate expectations where a chain transaction was wrongly evaluated.
Many banks outsource single tasks to external providers. Banks are only partly entitled to deduct input VAT. Therefore, banks are interested in the fact that the outsourced services are VAT exempt. The ECJ has already decided that, when purchasing cinema tickets, the processing of debit or credit card payments is not VAT exempt. Now, the German Federal Fiscal Court would like to know if this also applies to the operation of ATMs.
Whether legal remedies lodged in VAT related proceedings are successful not only depends on substantive law, procedural law can also be of decisive importance. For example: Appeal against assessment of interest ++ Sufficient determination of the claim ++ Liability of the managing director in the case of insolvency ++ Burden of proof re the place of supply ++ Amended tax assessment issued between the pronouncement of judgment and notification of judgement.
According to the ECJ decision of 08.02.2018, the taxation of travel service, in accordance with sec 25 of the German VAT Act, is contrary to the VAT Directive. Hence, Germa-ny will have to amend sec 25 of the German VAT Act. On the one hand, the scope of the margin taxation will have to be expanded to cover the supply of B2B services. On the other hand, the possibility of taxing the travel services, based on an overall margin will have to be denied. Until then, it should be borne in mind that double taxation or double nontaxation might apply to cross-border supplies. A positive outcome could be reached by referring directly to ECJ case law. For calculations and offers, as well as contracts, which relate to future projects, the planned tax changes should, as a precaution, be taken into consideration. However, there are also other outstanding issues.
In its decision of 18.01.2018 in the case Stadium Amster-dam CV – C-463/16, the ECJ decided, that the same VAT rate must be applied to a single supply. A single supply may not be divided, for the purpose of applying both the standard VAT rate and the reduced VAT rate. Accordingly, the obligations to split the VAT rate, which are standardized in the national VAT law, violate Union law. This affects the obligations of splitting e.g. regarding accommodation services with breakfast/parking spaces, letting of immovable property with operating facilities and letting of sports facilities to another taxable person.
In the case C-462/16 – Boehringer Ingelheim the ECJ has decided that a reduction of the taxable base is given although the person who benefits from the granted discount is not a recipient of the goods. The ECJ case was regarding discounts for the supply of medicine granted by pharmaceutical companies to private health insurance companies. The pharmaceutical companies can now expect a VAT refund. Other companies may also benefit from this judgement, in cases where they grant discounts to persons who are not part of the supply chain.