Latest VAT News
Here, we regularly inform you about new court decisions and other newsworthy developments in VAT matters.
No clear line for travel services – ECJ ruling on Dragoram Tour, C-763/23, from 25/06/2024
Services provided by travel agencies and tour operators are subject to margin taxation, regulated in § 25 of the German VAT Code and Art. 306 et seq. of the VAT Directive (Tour Operators Margin Taxation – TOMS). Even after the ECJ clarified that this covers B2B as well as B2C constellations, the scope of application remains unclear. The ECJ rulings appear contradictory, particularly with regard to the question of whether a travel service must consist of a bundle of services.
No direct claim if the tax office has already refunded the VAT – ECJ C-83/23 of 5 September, H GmbH
Since the ECJ's "Reemtsma" ruling, it has been clear that a recipient of supplies may be entitled to a direct claim against the tax office if they have wrongly paid VAT to the supplier and it is impossible or excessively difficult to obtain a refund from the supplier. The BFH (German Federal Fiscal Court) has referred a case with some special features to the ECJ. The decision is to the disadvantage of the recipient of the supply.
Triangular transactions without transfer of the VAT liability finally fail: BFH ruling XI R 35/22 of 17 July 2024
Most people know that an invoice for an intra-Community triangular transaction must contain a corresponding note. What is often overlooked is that the tax liability must also be explicitly transferred to the customer. If the information is missing from the invoice, this cannot be corrected, i.e. there is definitely no triangular transaction. This has now been confirmed by the BFH (German Federal Fiscal Court).
Internal supplies in a VAT group are out of the scope of VAT: ECJ ruling C-184/23 of 11 July 2024, "Finanzamt T"
When the BFH submitted the "Finanzamt T" case to the ECJ for the first time in 2020, the Advocate General shocked the German VAT world with her thesis that internal supplies within a VAT group could be subject to VAT. Unfortunately, the ECJ did not clarify this issue as clearly as would have been desirable in its judgement in 2022. The BFH therefore felt compelled to submit the case to the ECJ again, reduced to this question. This time, the answer is clear.
Valuable waste – BFH judgement V R 77/22 of 18 April 2024
If an economic value is to be attributed to waste to be disposed of, the tax authorities assume a barter-like transaction – possibly with an additional cash payment. The BFH (German Federal Fiscal Court) comes to a different conclusion if the waste disposal company accepts the waste exclusively for legally prescribed disposal in accordance with a recycling process for recovery/regeneration specified by law. In these cases, there is no supply of waste, which would be necessary for a barter-like transaction.
Affiliated company as fixed establishment - ECJ ruling C-533/22 "SC Adient" of 13 June 2024
In 1997, the ECJ opened a Pandora's box with its decision in the DFDS case (C-260/95) by ruling that the equipment of a subsidiary acting as an auxiliary person in the provision of services could constitute a fixed establishment for the parent company. In some countries, the tax authorities subsequently began actively searching for fixed establishments within group structures. In Germany, the judgement was not very well received. The ECJ's judgement in the "SC Adient" case provides companies with a little more legal certainty as the ECJ has further narrowed the definition of what constitutes a fixed establishment.
VAT rate for ancillary supplies to accommodation services: BFH submissions to ECJ, published on 13 June 2024
After the recent ECJ ruling on two cases regarding the split of uniform supplies for VAT purposes, the BFH (Federal Fiscal Court in Germany) is unsure how this will affect the allocation requirement of § 12 (2) no. 11 sentence 2 UStG (German VAT Code) for accommodation services with dependent ancillary supplies. It is therefore referring three cases to the ECJ for a preliminary ruling, namely concerning car parks (XI R 11/23), breakfast (XI R 13/23) and, among other things, fitness facilities and Wi-Fi (XI R 14/23).
BMF (Federal Ministry of Finance) circulates draft letter on e-invoicing on 13 June 2024
On 1 January 2025, e-invoicing will become mandatory in Germany for certain supplies provided by taxable persons based in Germany (although transitional rules are available to help suppliers). The Federal Ministry of Finance summarises the key legal regulations and provides some practical provisions to supplement the law. Here we summarise the key points for you.
Allocation decision for input VAT deduction - BMF circular letter dated 17 May 2024
If a taxable person purchases a uniform asset and uses it at least 10 % for business purposes, there is the option of allocating the asset to the business sphere and claiming input VAT accordingly. While the tax authorities previously required that the tax office always be notified of this decision by the end of the statutory tax return deadline, the ECJ and BFH (German Federal Fiscal Court) have decided otherwise. The BMF (German Federal Ministry of Finance) is now aligning itself with the ECJ and BFH rulings.
BFH acknowledges chain supply in the case of fractional transport - BFH decision XI R 1/20 dated 22 November 2023
A chain supply requires the goods to be transported directly from the first supplier to the last buyer - as stipulated in § 3 (6a) UStG (German VAT Code). If two or more parties are involved in the transport, the tax authorities assume that this is not a chain supply. However, the XI Senate has taken a different view.