On July 11 2014, the German Federal Council adopted the Act for the Adaption of the National Tax Law to reflect the Accession of Croatia to the EU and to Amend Further Tax Law Provisions, which also amends the German VAT Act.
In section 4 number 25, the VAT exemption for child day care services was adapted. The amendment will become effective on the day after the promulgation in the Federal Law Gazette. A VAT exemption for employment services has also been implemented with section 4 number 15b and will take effect from January 1 2015. The VAT exemption for the supply of staff by religious or philosophical institutions was also adapted into EU law in section 4 number 27 lit. a.
Commissionaire structures for telecommunications
Section 3 number 11a was implemented with effect from January 1 2015 and section 45h paragraph 4 of the German Telecommunication Act (TKG) was deleted. This means the important VAT regulation on commissionaire structures was brought back into the VAT Act. However, the legislature (intentionally) derives from article 9a of the EU Implementing Regulation 282/2011. Time will tell if this will ultimately make sense.
The German VAT Act was amended extensively to implement the rules of the MOSS for telecommunications, broadcasting and television services as well as other services provided by electronic means to non-taxable persons. The place of supply will be deemed to be where the customer is established. The regulation on the One-Stop-Shop which previously only applied to suppliers established outside the EU has now also been extended to those established in the EU sections 18 and 27 paragraph 20 will be implemented with effect from October 1 2014. Section 3a paragraph 4 sentence 2 numbers 11 to 13 will be deleted and section 3a paragraph 5 will be amended, in addition to other regulations of the German VAT Act and the German VAT Implementing Regulation with effect from January 1 2015.
Limitation of the minimum taxable amount
Section 10 paragraph 5 was adapted to EU law and restricted in so far that the open market value is the maximum limit for the taxable amount. The amendment will become effective on the day after the promulgation in the Federal Law Gazette.
Reduced VAT rate for audio books
Number 50 was added to Annex 2 of the VAT Act which makes the reduced VAT rate applicable to audio books (sound recording of the reading of a book) just as it is to printed books. The change will take effect from January 1 2015.
Tablets and game consoles
Section 13b paragraph 2 number 10, according to which the VAT liability for supplies of mobile phones and integrated circuits is shifted to the customer if the remuneration amounts to a minimum of €5,000 ($6,717), also applies to supplies of tablet computers and game consoles with effect from October 1 2014.
Number 11 was added to section 13b paragraph 2 and thereby, a reverse-charge-scheme was implemented for the supplies of the precious metals, silver, gold and platinum, and for all base metals with effect from October 1 2014. The new annex 4 to the VAT Act contains a full list of the metals concerned.
In its decision of August 22 2013, the Federal Fiscal Court concluded that the so-called 10% hurdle for the determination of “sustainable construction work“ is unsuitable as the contractor is unable to assess reliably whether he or his customer is liable to pay the VAT. Rather, it will be decisive whether a direct link exists between the received and the carried out construction work. The definition of “sustainable construction work” has now been implemented in section 13b paragraph 5 sentence 2 and thereby, the missing legal regulation has been created with effect from October 1 2014. In future, the responsible tax office will decide the issue of sustainability by issuing a certificate. As to when sustainability exists is not mentioned in the law. An invoicing of construction services without VAT, because of the reverse-charge-scheme, will only be possible, in future, if the customer provides a certificate.
Abolition of the legitimate expectation
A new paragraph 19 was added to section 27, which governs the correction of VAT assessments of sub-suppliers of property developers. The effect of the decision of the Federal Fiscal Court of August 22 2013 on the public budget will be limited because of this amendment. The property developers could have reclaimed billions of euro whereas the sub-supplier could have referred to the legitimate expectation of article 176 of the General Tax Code and have escaped additional VAT payments. The amendment will become effective on the day after the promulgation in the Federal Law Gazette.
The definition of sustainability was implemented in section 13b paragraph 5 sentence 5 for cleaning services suppliers. In future, the responsible tax office will decide on the question of sustainability and issue the respective certificates. The change will take effect from October 1 2014.
No reverse charge in the case of margin schemes
A new sentence 8 was added to section 13b paragraph 5 according to which the reverse-charge-scheme will not apply to supplies under the margin scheme of section 25a of the VAT Act. The change will take effect from October 1 2014.
Legitimate expectation for reverse charge
The regulation on legitimate expectation in section 13b 8 of the German Administrative Guidelines for certain cases of the reverse-charge-scheme was implemented in section 13b paragraph 5 sentence 6 of the German VAT Act. Based on this regulation, there will be no objection if parties apply the reverse-charge-scheme in the case of doubt, provided no tax losses result. The Federal Fiscal Court rejected the regulation in the Administrative Guidelines, as it contended that the decision, as to the applicability of the reverse-charge-scheme, cannot be left to the discretion of the individual participants. The change will take legitimate effect from October 1 2014.
Ronny Langer (firstname.lastname@example.org) is a certified tax consultant and a partner of Küffner Maunz Langer Zugmaier, the principal German correspondents for the Indirect Tax channel on www.internationaltaxreview.com.
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