close
Share with your friends

Germany: Copyright “formal warning” enforcement actions subject to VAT

Germany: Copyright “formal warning” enforcement actions

The German Federal Tax Court (BFH) determined that “formal warnings” given by a copyright holder to enforce copyright-related injunctive relief against the party infringing the copyright are subject to value added tax (VAT).

1000

Related content

According to the BFH decision, the consideration for the supply of a warning is the amount paid by the infringer.

The case is the BFH decision in: XI R 1/17 (13 February 2019).

The case concerns a recording company that engaged the help of a law firm to issue warnings to people who had unlawfully distributed recordings online. In return for the people signing a punitive cease-and-desist declaration and paying a flat-rate €450 (net), the company offered to refrain from legal prosecution of the copyright claims.

The BFH rejected this transaction as a compensation for damages. Instead, the court applied the same standard as applied under the law on unfair competition to the copyright and related rights law. In this regard, according to the BFH, warning letters in cases of competition violations and in cases of copyright infringement do not differ substantially in content. In both situations, the warnings serve the same purpose—a demand for submission of a punitive cease-and-desist declaration opens up the possibility of avoiding a lawsuit, and an entitlement to reimbursement is based on a (specifically legally codified) negotorium gestio.

Other VAT-related developments

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

  • Provision of fuel card as financing service (CJEU judgment of 15 May 2019 ‒ Vega International Car Transport and Logistic Trading (C-235-18))
  • CJEU referral submission concerning an unsuccessful operator (BFH ruling dated 27 March 2019, V R 61/17)
  • CJEU referral submission concerning identity of the issuers of invoices and supplying traders (BFH ruling dated14 February 2019, V R 47/16)
  • VAT treatment of prize money that is dependent on placement (German Ministry of Finance (BMF) guidance of 27 May 2019)
  • Sale of co-ownership shares as a supply of goods (BMF guidance of 23 May 2019)


Read a June 2019 report [PDF 310 KB] prepared by the KPMG member firm in Germany.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal