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Germany: Referral to CJEU, VAT liability of EU subsidies

Germany: CJEU, VAT liability of EU subsidies

The German Federal Tax Court (BFH) has asked the Court of Justice of the European Union (CJEU) to clarify whether value added tax (VAT) may be charged on EU subsidies.

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Specifically, the two referral orders (September 2018) pertain to financial assistance within the scope of the common organization of the market in fruit and vegetables.

The submission to the CJEU also concerns the minimum basis for the VAT calculation for discounted payments made, for example, by corporations to their trading partners. In particular, the CJEU is asked to clarify whether the minimum basis rule applies even though the recipient is entitled to the full input tax deduction in situations involving a discounted supply of capital items that are subject to input tax deduction corrections. Until now, the BFH has agreed to this position. It remains for the CJEU to issue a judgment on this issue.

Other VAT developments

Other recent VAT developments that may affect businesses in Germany include the following items:

  • Agreement on new EU regulations: Quick fixes from 2020 and optional reduced VAT rates for electronic publications (Council press releases of 2 October 2018 – 532/18; 533/18; 534/18 and 535/18)
  • Complete address details on invoices (BFH decision of 13 June 2018, XI R 20/14)
  • Only one VAT rate for single supplies (BFH decision of 13 June 2018, XI R 2/16)
  • Input VAT distribution in the case of time-based alternating use of a building (BFH decision of 26 April 2018, V R 23/16)
  • Zero-rating of transactions, shipping by sea and aviation (BMF guidance of 5 September 2018 – III C 3 – S 7155/16/10002)

 

Read an October 2018 report [PDF 318 KB] prepared by the KPMG member firm in Germany

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