Germany: Supermarket discount model “membership” subject to standard VAT rate

Germany: Supermarket discount model “membership”

The German Federal Tax Court (BFH) held that a grant, for consideration, of the right to buy goods at a reduced price (in the form of a “membership”) constitutes an independent supply for value added tax (VAT) purposes.


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The court held that:

  • The grant under the membership is not merely an ancillary supply with regard to a later purchase of goods.
  • Even if the supermarket sells goods that are subject to the standard VAT rate (19%) as well as the reduced VAT rate (7%), the standard VAT rate must be applied to the membership fee.

The case is the BFH judgment of 18 December 2019 (XI R 21/18).

As explained in the judgment, the customer—with the membership right to discounted purchases—receives an economic advantage (supply) from the trader who sells this right, and the customers with memberships have access to supplies of goods at a reduced price. In particular, the right constitutes not merely the provision of a “credit note” or “points” that serve as the type of payment for purchasing other supplies, such as credit notes with a quantifiable value, because the membership fee paid is not used as a credit for a later purchase of goods.

While the sales of goods were subject to either the reduced or the standard rate of VAT, the granting of a “membership” (in this case) was subject in full to the standard VAT rate. In a related press release, the BFH explicitly noted that it was not making a statement on the VAT assessment of other discount models, in which for example, the membership fee depends on the customer’s revenue or is offset against the purchase price of goods. The BFH also did not need to address if the case would have been judged differently if the discount had only applied to goods that were subject to the reduced VAT rate of 7%.

Read a June 2020 report [PDF 318 KB] prepared by the KPMG member firm in Germany

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

  • Reduction in VAT rates effective from 1 July 2020
  • Retroactive effect of invoice corrections (BFH, judgment of 22 January 2020, XI R 10/17)
  • Extension of safe harbor provision—zero-rated cross-border transports (German Ministry of Finance (BMF), guidance of 2 June 2020)
  • United Kingdom publishes the new customs tariff system, the UK Global Tariff (UKGT) and the draft of an agreement with the EU (British government website)
  • Input VAT deduction concerning a putative service commission (BFH, judgment of 12 February 2020 – XI R 24/18)

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