Reduced German VAT: updated draft letter by Federal Ministry of Finance

In our blog article dated June 16, 2020, we discussed the first draft of a letter issued by the Federal Ministry of Finance (BMF) with information on the practical implementation of the temporary reduction in VAT. On June 23, 2020, BMF published an updated draft of the aforementioned letter.

The widely-hoped-for regulation on incorrect VAT disclosure on invoices (§ 14c German VAT Code) is unfortunately covered only to a very minor extent: It is only a non-complaint rule for one month, i.e. until July 31, 2020.

The non-complaint rule is drafted as follows:

Does the performing entrepreneur invoice for a service rendered to another entrepreneur after June 30, 2020 and before August 1, 2020 at the VAT rate applicable before July 1, 2020 (19% instead of 16% and 7% instead of 5%) and this VAT amount is paid, there will be no objection by the tax office if the entrepreneur does not correct the VAT rate on the invoice. A beneficiary entitled to claim input VAT is granted input VAT deduction based on the reported VAT rate from such incorrect invoices for services rendered after June 30, 2020 and before August 1, 2020. This also applies to sales in accordance with § 13b German VAT Code.

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Source: Updated draft BMF Letter dated 23 June 2020 (German language)

Photo: Michael Walter, Unsplash

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