Latest VAT News
Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
Input VAT deduction in the spouse model may be permissible – BFH ruling V R 29/20
Non-deductible input VAT is a nuisance, and creative approaches are sometimes used to remedy this. However, an input VAT deduction obtained this way often runs counter to the values of the VAT Directive and is therefore inadmissible; the ECJ came to this conclusion most recently with regard to the intermediary model (C-98/21). However, in its ruling of 29 September 2022, published on 12 January 2023, the BFH (Germany’s Federal Fiscal Court) approved a model in which an entrepreneur who was not entitled to deduct input VAT had used his wife as an intermediary.
Annual Tax Act 2022 – Input VAT deduction in the refund procedure and late submission of the EC sales list
VAT in the Digital Age: EU Commission publishes draft Directive
The VAT Directive must be adapted to the digital transformation of economic activities – the EU Commission has been working on this for a long time. On 8 December 2022, it presented a draft for an amended Directive that is intended to completely digitalise the VAT invoicing and reporting obligations, expand the previous regulations for the platform economy and avoid VAT registrations in other EU countries. Here, we present only the most important innovations. The proposed Directive will result in additional changes not outlined here.
Update: Instalment payments do not constitute partial supplies or uncollectability – BMF circular letter dated 14 December 2022
After the BFH (Federal Fiscal Court) implemented the corresponding ECJ ruling on the VAT treatment of instalment payments in its ruling of 31 January 2022 (V R 37/21), the BMF (Federal Ministry of Finance) is now amending the VAT application decree accordingly.
Triangular transactions that have gone wrong cannot be saved – ECJ decision "Luxury Trust" of 8 December 2022, C-247/21
Refusal of input VAT deduction in case of fraud is not limited to the tax loss – ECJ decision of 24 November 2022, C-596/21
Anyone who knew, or should have known, that their turnover (purchase) was part of a tax evasion scheme is denied the input VAT deduction. The ECJ has stated that this also applies if the input VAT amount exceeds the evaded tax amount. Because an item’s price normally increases along the service chain, this scenario is likely to be rather rare. However, the case in this decision illustrates the ECJ's extremely strict stance on this issue.
ECJ decision on German submissions on VAT groups
Symbolic remuneration is insufficient for economic activity - BFH ruling XI R 35/19
Free of charge supplies are a problem for VAT purposes: If there is no case of taxable gratuitous transfer of value, the gratuitousness leads to the fact that there is no right to deduct input VAT for supplies purchased for this purpose. In practice, this situation is often avoided by agreeing on at least a small, possibly only symbolic remuneration – if the requirements of the minimum assessment basis are not met. The ECJ decision in the "Gemeente Borsele" case has severely restricted this alternative. The XIth Senate of the BFH (Federal Fiscal Court) is now also dealing with this.
Input VAT apportionment for mixed-use real estate – BMF circular letter dated 20 October 2022
The permissible pro-rata key for input VAT on real estate that is only partially used for transactions entitled to input VAT deduction (mixed-use real estate) has been the subject of dispute for a long time. The tax authorities want to, as much as possible, replace the total turnover key (required by the VAT Directive, by default) with an area key. However, they are encountering an obstacle: the deviating case law of the ECJ and BFH (Federal Fiscal Court).
VAT Committee publishes working paper on fuel cards
With its ruling in the "Vega International" case (C-235/18, 15 May 2019), the ECJ had shaken the fuel card business to its foundations: from a VAT perspective, fuel card issuers should no longer be seen as buying and selling fuel, but rather as providing financial services. This initially prompted the German Federal Ministry of Finance (BMF) to circulate a draft letter indicating that the chain supply business would be declared the exception rather than the rule starting 1 January 2022. When it became known that the EU’s VAT Committee wanted to deal with the issue, the authority backed off to await the outcome in the interest of having a uniform EU-level ruling. On 21 October 2022, the VAT Committee published a working paper on this issue (No. 1046).