Special cases for settlement by means of credit note

The Federal Ministry of Finance has clarified the sales tax consequences of credit notes in certain special cases.

An invoice can also be issued by the recipient of the service, provided this has been agreed in advance. This is referred to as a credit note for VAT purposes. The Federal Ministry of Finance has taken a ruling by the Federal Fiscal Court on this form of invoicing as an opportunity to explain the VAT consequences in certain special cases. These explanations are to be applied in all cases that are still open.

• Noncontractors: According to the ruling of the Federal Fiscal Court, a credit note to a non-entrepreneur is not equivalent to an invoice within the meaning of the VAT Act. This settlement document therefore does not trigger any VAT liability for the recipient of the credit note arising from an unauthorized tax statement. Conversely, the issuer of the credit note cannot claim an input tax deduction from this settlement document, as the legal requirements for the input tax deduction are not met if the settled service was not performed by an entrepreneur.

• Failure to Perform: If a credit note is issued between two entrepreneurs for a service that has not been performed, then this settlement document is equivalent to an invoice and can trigger a tax liability due to an incorrect VAT statement. The ruling of the Federal Fiscal Court therefore does not apply here. Incidentally, it is still not possible to deduct input tax from such a settlement document because the legal requirements for the deduction of input tax are not met in this case either.

• Opposition: Due to an effective objection of the credit note recipient against a credit note issued to him, there is no longer an invoice document as of the taxation period of the effective objection. As a result, the issuer of the credit note no longer has an invoice from this point in time, which means that input tax can no longer be deducted. However, an effective objection to a credit note alone does not lead to the elimination of the tax threat due to the different invoice terms in the various sections of the VAT Act. Even after the objection, the recipient of the credit note therefore continues to owe the tax office the VAT shown until the tax threat has been eliminated by the reversal of the input tax deduction by the issuer of the credit note.