On 22.12.2020, the Federal Ministry of Finance (BMF) published the forms for the 2021 advance return for VAT.
The new model forms contain two significant changes
Companies will need to make system and procedural adjustments
The Federal Ministry of Finance usually publishes the new model forms for the advance VAT returns in the second half of the year. The current announcement was made after the Annual Tax Act 2020 came into force. In addition to editorial adjustments, the BMF has made two significant changes.
These changes present companies with further administrative challenges and will require adjustments in the corresponding processes.
New requirements from the BMF letter of 22.12.2020
With effect from 1 January 2021, the service recipient's liability for tax has been extended to include other services in the field of telecommunications. Such transactions must now be stated separately in the new form by the supplier and the recipient of the service, together with the tax.
In addition, the BMF has introduced two new key figures on the form for the advance VAT return (UStVA) Germany:
- If the basis of assessment for a taxable turnover has changed, the entrepreneur must, as before, indicate the amount of tax owed for it in accordance with Section 17(1) sentence 1 in conjunction with. Section 17 (2) no. 1 sentence 1 UStG. The changes are to be entered in the assessment bases of the respective turnover. If the change is made because the agreed consideration for a taxable transaction has become irrecoverable (e.g. in the case of insolvency), the reduction in the basis of assessment must also be entered.
- As a result of a change pursuant to Section 17 (1) sentence 2 in conjunction with (2) no. 1 sentence 1 UStG, a reduction in the deductible input tax amounts must be entered.
Significant administrative effort for companies
For businesses, the new form means a not inconsiderable need for adjustment.
First of all, the new form for the advance VAT return must be set up on the system side. The guidelines and regular updates of the respective ERP (Enterprise Resource Planning) system provider should also be observed so that it is always up to date. Some providers have already provided preliminary manual solutions for setting up the form.
It is also important to clarify how the special cases of uncollectability can be recorded separately in the ERP system to enable correct filling of the new forms. This can be done through new tax codes or recording on separate accounts, or a combination of both.
The main practical challenge, however, will be to record the various forms of uncollectability (e.g. short transitional insolvency of the debtor, definitive default, statute of limitations, etc.) in the system and finally to implement them consistently when posting.
Flexible adaptability as a success factor
Overall, the changes in the advance VAT return require companies to make adjustments to their systems. In the course of these adjustments, it is advisable to review and optimise systems and existing processes (e.g. quality assurance measures for the classification of case scenarios or additional controls). Since changes in the declaration obligations are likely in the future - especially in consideration of EU-wide developments (real-time reporting obligations, e-invoicing, SAF-T, etc.), companies should generally make sure that systems and processes are designed to be flexible and future-oriented.