- When is one an entrepreneur in the sense of value added tax?
- When do you have to submit advance VAT returns and annual VAT returns?
- What do I have to take into account when issuing invoices?
- What do I have to consider when purchasing services from abroad?
- What is meant by "reverse charge procedure"?
- What is a special VAT audit?
Value added tax law situations - whether national or international - are becoming increasingly complex. An incorrect assessment of a VAT issue can have a negative impact not only once, but continuously. Avoid VAT risks - both in national and cross-border situations! Our tax consultants, auditors and lawyers are specialized in VAT consulting as well as in consulting on international tax law.
Due to the corona pandemic, the German government has decided to temporarily reduce the value added tax to 16 percent until December 31, 2020. The reduced VAT rate has fallen from seven to currently five percent.
1. When does a foreign entrepreneur have to register for VAT in Germany?
One of the most important questions in our day-to-day business is whether foreign entrepreneurs have to register for VAT in Germany.
In case you should answer yes to any of the following questions, we should talk:
- Are you selling goods via Amazon or Co. in Germany?
- Are you selling goods to individuals in Germany and does the amount of sales exceed 100,000 €
- Have you stored goods in Germany and are you selling this goods?
- Are you organizing a conference in Germany?
- Are you in the constructions industry and do you engage a foreign entrepreneur as sub-contractor for a German construction site?
- Are you paying German import VAT tax?
- Are you renting out German real estate properties with VAT?
2. Under which conditions can a tax payer receive the German import VAT back from the German tax authorities?
- The goods are used for the entrepreneur activities and the activities allow the deductions of the input VAT.
- The entrepreneur has the power of dispose of the goods at the time of the import of the goods.
- In order to prove that the import was subject to import VAT the entrepreneur should have the assessment notice of the customs authority in his files.
Reduction of the VAT rate from 1 July 2020 to 31 December 2020 and extension of the deadline for the payment of the import VAT
After initially only, the catering trade was to be supported by a reduction in the VAT on food from 19% to 7% due to the severe cuts caused by the pandemic, the governing parties last week agreed overall on a temporary reduction in the VAT to boost domestic demand. The aim is to ease the burden on consumers. Whether this will be achieved remains to be seen. Let us hope for the best. Although the law has not yet been passed, with less than 4 weeks remaining until 1 July 2020, there is an urgent need for companies to act. The systems must be converted by 1 July 2020 - permanent invoices or contracts must be updated.
Furthermore, the parties agreed on extend payment deadline for the import VAT. The import VAT has to be paid by the 26th of the following month.
According to the agreed economic stimulus and crisis package, the following tax rates are to apply from 1 July 2020 to 31 December 2020:
- Standard tax rate is 16 % (instead of 19 % currently)
- Reduced tax rate is 5% (instead of 7% currently)
b) What is to be observed
It is now important to ensure that the correct tax rate is applied to all services carried out from 1 July 2020 and shown on the invoice. The decisive factor in determining the correct tax rate is when the turnover is exported.
Time of execution
- Delivery of goods: Procurement of the power of disposal
- Importation: carrying out the importation
- Other service: End of service / acceptance
c) What happens if the wrong tax rate is shown
An incorrect tax statement in invoices or contracts means that the issuer of the invoice must pay the amount shown to the tax office. In contrast, an invoice recipient entitled to deduct input tax may only claim input tax at the legally applicable tax rate.
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