Latest VAT News - Forvis Mazars

No input VAT deduction without an invoice, but a faulty invoice may be sufficient - ECJ "Wilo Salmson France SAS" (C-80/20)

ECJ confirms in its judgement of 21 October 2021 (C-80/20) in the "Wilo Salmson France SAS" case: input VAT cannot be deducted unless there is an invoice. The input VAT deduction must be made for the taxation period in which the invoice was available. For this purpose, it must contain the essential attributes of an invoice, although other attributes can be added later with retroactive effect. If an invoice, once issued and containing the essential attributes, is unilaterally cancelled and reissued, the taxation period for which the invoice was first issued nevertheless remains the correct period for the input VAT deduction.

Hinweispflichten im Vorsteuervergütungsverfahren - EuGH-Urteil "CHEP Equipment Pooling NV" (C-396/20)

Erkennt der Mitgliedstaat der Erstattung einen Fehler in einem Vorsteuervergütungsantrag, so gebieten es der Grundsatz der Neutralität der Mehrwertsteuer sowie der Grundsatz der guten Verwaltung, den Unternehmer darauf hinzuweisen. Berichtigt der Unternehmer daraufhin seinen Antrag, so gilt die Antragsfrist als gewahrt. Dies entschied der EuGH mit Urteil vom 21. Oktober 2021 (C-396/20) in der Rechtssache „CHEP Equipment Pooling NV“.

Allocation decision for mixed-use capital goods - ECJ ruling "E" and "Z" (C-45/20 und C-46/20)

In 2019, the German Federal Fiscal Court (Bundesfinanzhof, BFH) had referred two cases to the ECJ for a preliminary ruling concerning the exercise of the option to allocate an item to the business and thus to claim the input VAT deduction to that extent. Until now, German law required the allocation decision to be reported to the tax office before the normal deadline for submitting the VAT return. The BFH had doubts as to whether this conformed with EU law. The ECJ confirmed the basic admissibility of a time limit but left it to the BFH to decide whether the length of the specific time limit was commensurate.

Reimbursement of expenses for certain written warnings will be subject to VAT - BFH rulings XI R 27/14 and XI R 1/17

On 21 December 2016 (XI R 27/14) and 13 February 2019 (XI R 1/17), the Federal Fiscal Court (BFH) ruled that the reimbursed expenses paid by a person issued a written warning for copyright or competition law infringement is a service charge that is subject to VAT. The BMF also adopted this view in its letter dated 1 October 2021 and clarified some specific questions. The key details are summarised below.

Update: VAT and insurance tax treatment of guarantee commitments - BMF circular lettter dated 18 October 2021

Germany’s Federal Ministry of Finance (BMF) is once again extending the transitional rule for the treatment of paid guarantee commitments as an insurance service in a circular letter dated 18 October 2021. This gives entrepreneurs more time and flexibility to adapt to the amended Federal Fiscal Court (BFH) case law.

Reverse charge procedure for VAT groups as recipients of supplies - BMF circular letter dated 27 September 2022

In its ruling of 23 July 2020 (V R 32/19), the Federal Fiscal Court (Bundesfinanzhof, BFH) issued a decision in a property development case: If the recipient of construction work supply is part of a VAT group, the applicability of the reverse charge procedure is dependent on the external supplies of the VAT group. In a letter dated 27 September 2021, the German Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) subsequently amended the VAT Application Decree (Umsatzsteuer-Anwendungserlass, UStAE) and extended this legal principle beyond property development cases to other areas in which the reverse charge procedure is applied in VAT group cases.

Management fee for venture capital funds has been exempt from VAT since 1 July 2021

The German Fund Location Act extended Sec. 4 no. 8 h of the German VAT Code with effect from 1 July 2021. As a result, the management of venture capital funds is also exempt from VAT. This has significant implications for capital management companies.

Fraud warning: False VAT ID letters in circulation

Germany’s Federal Central Tax Office (BZSt) warns of official-looking letters or emails offering to issue, register, record or publish a VAT ID for a fee.

Time of input VAT deduction in case of taxation based on accruals - Opinion Advovate General "Kollaustraße" (C-9/20)

On 10 December 2019, the Hamburg Finance Court (1 K 337/17) decided to ask the European Court of Justice (ECJ) for a preliminary ruling on when the right to deduct input VAT arises for recipients if suppliers make use of taxation based on payments received. In his opinion (9 September 2021, C-9/19), the Advocate General proposes that the ECJ declare the relevant German statutory provision incompatible with the VAT Directive.

Is the VAT refund procedure a way out for foreign landlords? - ECJ-ruling "Titanium" C-931/19

In its judgement of 3 June 2021 (C-931/19) in the "Titanium" case, the ECJ ruled that a rented property is not a fixed establishment for the application of the reverse charge procedure if the owner of the property does not have its own staff in that country for the performance of the rental service in question (as we reported). This prevents many entities from registering for VAT purposes and offsetting the input VAT via the preliminary VAT returns. The tax authorities still see this differently. How should companies deal with this uncertainty?