Temporary reduction in sales tax rates

The Federal Ministry of Finance has announced further clarifications and detailed regulations on the reduction of sales tax.

The temporary reduction in VAT rates as part of the coronavirus economic stimulus package is about to come to an end. However, this has not stopped the Federal Ministry of Finance from announcing further clarifications and detailed regulations for the reduction, which must be observed for certain sales and sectors. Even if the lockdown in November and December significantly slows down the economic recovery, there are no plans to extend the reduction beyond December 31, 2020.

• Advance and down payment invoices: In advance and down payment invoices that are issued and paid in the second half of 2020, the tax is to be calculated at 16 % or 5 %. If it is certain that the service will not be provided until after December 31, 2020, the tax rate of 19 % or 7 % valid at that time can also be applied. In this case, the recipient of such an invoice may claim the full amount of tax shown as input tax under the other conditions for advance payment invoices. If the tax is calculated at 19 % or 7 % in an advance or down payment invoice before July 1, 2020, but the invoice was not paid until after June 30, 2020, the supplier is liable for the VAT shown. However, the customer may only claim the lower tax rate when deducting input tax - subject to the non-objection rule for July 2020. Advance payment invoices that are issued in 2020 but not paid until 2021 are taxable at 19 % or 7 %, even if the invoice shows a lower tax rate. In this case, the customer may still only claim the input tax deduction in the amount of the tax shown.

  

• Vouchers: The issuance of a voucher for a bindingly ordered item, where a later exchange, cash payment or transfer of the voucher is excluded and the issuance of which is linked to an obligation to purchase, is not regarded by the tax authorities as a single-purpose voucher - with the result that the lower VAT rate for the service specified in the "voucher" cannot be saved over the turn of the year in this case. Instead, it is an advance payment that is taxable upon receipt of the payment. If the supply or service is provided after December 31, 2020, the VAT must then be adjusted to 19 % or 7 %. If it is already clear at the time of payment that the delivery will not take place until 2021, the advance payment can already be taxed at 19 % for reasons of simplification.

• Restaurant vouchers: If vouchers were issued before July 1, 2020, they will continue to be taxed as single-purpose vouchers at 19 %, even if they are redeemed later. Since the tax rate cannot be clearly determined from July 1, 2020 to June 30, 2021 due to the different taxation of food and beverages, vouchers issued in and for this period are multi-purpose vouchers, which are only taxed at the then applicable tax rate when the service is provided. Vouchers for restaurant services issued during this period can only be treated as single-purpose vouchers if the vouchers are explicitly limited to food or drinks only. Vouchers for restaurant and catering services including beverages will only be treated as single-purpose vouchers again if they are issued for the period from July 1, 2021.

  

• Hospitality industry: The lower VAT rates applicable from July 1, 2020 are to be applied to overnight accommodation and related services as of July 1, 2020. For reasons of simplification, these tax rates can also be applied to hospitality services as well as accommodation and related night-time services as of January 1, 2021.

• Rental or leasing contracts: Irrespective of whether special and compensation payments under a rental or leasing agreement are attributable to the main or ancillary service, the VAT rate is based on the time of performance of the respective main service. If the main service is only partially provided in the second half of 2020, the payment is to be allocated pro rata temporis to the respective main service. Other appropriate allocation methods are permitted.

• Recurring services: Services that are provided once or several times a year are not deemed to be continuous services, even if the underlying agreement is concluded for a specific period. This applies, for example, to maintenance contracts in which no continuous service readiness is owed, but maintenance is carried out regularly once a year or quarterly. Instead, such services are performed on the day of each individual service provision.

• Newspaper and magazine subscriptions: In the case of digital subscriptions, the service is performed on the last day of the agreed service period. The same applies to analog subscriptions if no separate fee has been agreed or billed for the individual issues.

• Reimbursement of deposit amounts: For reasons of simplification, deposit money can be invoiced with 16 % VAT in the second half of 2020 if both the supplier and the customer correct the VAT or input tax at 16 % and this invoicing method is also applied to deposit money from January 1, 2021, then at the tax rate of 19 %. This regulation and the already announced alternative simplification regulation for deposits apply not only to bottle deposits, but also to other items subject to deposits.

• Scaffolding: By providing professionally assembled scaffolding for a certain period of time, the scaffolder provides a uniform other service. This is not a work performance in the VAT sense, as the scaffolder does not undertake the processing of an object. The assembly and disassembly are ancillary services to the main service, the provision of the scaffolding for a certain period of time. However, the overall service "scaffolding construction" can also be divided into partial services according to periods of use with the service components assembly, standing time (sum of basic provision and overhang rent) and dismantling. The prerequisite for this is that the service components are owed and performed individually. If no partial services are agreed, the service shall be performed upon completion of dismantling.