The Ministry of Finance (BMF) issued guidance to implement reductions to the rates of value added tax (VAT) provided as relief measures in response to the coronavirus (COVID-19) pandemic. The VAT standard rate is reduced to 16% and the VAT “reduced rate” is further reduced to 5% for the period 1 July 2020 to 31 December 2020.
Ministry of Finance guidance (30 June 2020) contains explanations and transitional arrangements about certain items such as:
If the supplying trader issues an invoice to another trader for a supply conducted after 30 June 2020 and before 1 August 2020, but showing the VAT rate applicable before 1 July 2020 (19% instead of 16%, or 7% instead of 5%) and has remitted this VAT amount, no objection will be raised in an effort to keep the matter simple if the trader does not correct the VAT amounts shown on these invoices. For practical purposes, during the transition period (in July 2020), a trader that is entitled to deduct input VAT will be granted an input VAT deduction on the basis of the VAT rate shown. For transactions on which the recipient of the supply owes VAT in accordance with section 13b UStG, this provision also applies for the VAT calculated by the recipient of the supply.
As a result of COVID-19 relief measures, restaurant and catering services (with the exception of the tax treatment of drinks) will be taxed at 5% from 1 July 2020 until 31 December 2020, and at 7% from 1 January 2021 until 30 June 2021.
Separate BMF guidance (2 July 2020) includes certain “no-objection rules” in instances for separating the total purchase price of so-called “combo offers” (such as a buffet all-inclusive offer) for food (reduced VAT rate) and for drinks (regular VAT rate). Also the guidance refers to the VAT treatment of business packages, in which supplies are partially not subject to reduced VAT.
Read a July 2020 report [PDF 312 KB] prepared by the KPMG member firm in Germany
Other recent VAT developments that may affect businesses in Germany include the following items:
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.