Following decisions of the European Court of Justice and the German Supreme Tax Court the Federal Finance Ministry has issued guidelines on the VAT grouping and the input VAT deduction for holding companies. In a special VAT Newsflash our tax experts take a closer look on the situation as a whole.
The finance ministry has amended the VAT group provisions of its VAT Implementation Decree to take account of recent European and Supreme Tax Court cases.
According to the Supreme Tax Court, there is no retroactive right for input VAT deduction for a German company receiving services from other group companies who initially issued the invoices without VAT but later went to correct it. The correction of the invoice with retroactive effect requires that the original invoice already contains a VAT amount, which was not the case in the dispute before the court.
The finance ministry has added a discussion on customary market price as a measure for the VAT on staff and related party sales to its VAT Implementation Decree.
The Supreme Tax Court has asked the ECJ for a ruling on the determination of the amount of deductible input VAT of holding companies with taxable outputs and on the conditions for joining VAT groups.
Art. 132 (1) (j) VAT Directive also covers teaching units that relate to training, advanced training, or job requalification measures as a VAT exempt service. The narrow standards and requirements set by the ECJ for the tax exemption of school and university teaching in Article 132(1) (i) do not apply here. Accordingly, the Supreme Tax Court held that services provided by a supervisor may be exempt from VAT under Article 132 (1) (j) VAT Directive.
The PwC VAT Newsflash deals with the overhaul of the provisions of the German VAT Application Guidelines about the VAT treatment of travel services, following an amendment of the respective provision of the German VAT Act and considering the latest case law.
Pending before the ECJ are currently two questions of relevance regarding the German regulation of consolidated tax groups for VAT purposes (VAT group). In her Opinion on both cases the Advocate General takes the view that the sole taxable person is, in principle, the VAT group itself and not (as under German VAT law) the controlling member of the group.
In a recent judgment the Supreme Tax Court decided that the requirements for an invoice within the meaning of Section 14c (2) Value Added Tax Act (VAT Act) are fulfilled if the document contains the issuer of the invoice, the (presumed) recipient of the service, a description of the service, the remuneration, and information on the VAT shown.
In a recent decision the Supreme Tax Court dealt with the provision of services by public bodies under German VAT law. If the economic activities of a public body are not outstanding and distinct from its overall activities it is not a taxable business for VAT and thus not eligible to deduct input VAT incurred on the underlying costs.
France has chosen to exercise the option of Article 11 of the VAT Directive as of 1 January 2023 and to provide for the establishment of a VAT group if certain requirements are met. With this new optional regulation in force France joins most other EU countries providing for one VAT entity for the whole group and a single VAT registration in this respect.
In a most recent ruling, the European Court of Justice (ECJ) held that, for situations where the output VAT is calculated at the time the remuneration is received rather when the service was completed, the German VAT provision that the right to deduct input VAT must be exercised upon completion of the supply or service is not in line with current EU law, in particular Articles 167 and 66 (1) of Council Directive 2006/112/EC.
The ECJ has held that gaming taxes levied on the net receipts do not conflict with the VAT Directive, even if the operator can deduct his net VAT charge from the amounts due.
The Muenster Tax Court has ruled that services provided by a self-employed hygiene specialist to geriatric facilities and nursing homes are exempt from VAT under Article 132 (1) (g) of the VAT Directive.
The Council of the EU reached agreement on the position of member states (the so-called ‘general approach’) on the directive on value added tax (VAT) rules for distance sales of imported goods and import VAT.
Pending introduction of the new VAT system, four short-term 'quick fixes' will be made regarding the VAT aspects of trade between the member states. Discussions are ongoing on a definitive VAT system to replace the current 'transitional' VAT arrangements, which have been applied since 1993.
The finance ministry has accepted an option for VAT on the sale of a business property expressly agreed only for the event that the view of the parties of the transaction as a (VAT-free) sale of an entire business should prove to be unfounded.
The dispute before the Supreme Tax Court concerned the question of whether the tax office was correct to adjust an input VAT deduction of the plaintiff - following a successful appeal under insolvency law - where the plaintiff later received a refund of the import VAT paid. The court could not see any reasons why the plaintiff should receive a refund even though it no longer owed the tax.
