Germany: Digital VAT package and distance sales proposals; other VAT developments

Germany: Digital VAT package, distance sales proposals

The German cabinet in early September 2020 agreed to the government’s draft proposal for the annual tax law for 2020, including measures for a draft value added tax (VAT) package for digital taxation.

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The digital VAT package includes measures to expand the threshold value of €10,000—the amount by which telecommunications services, radio and television services, and services provided electronically would continue to be subject to VAT in the EU Member State of residence of the person providing the supply.

Another measure would concern the place of supply of an intra-Community distance sale. In accordance with the destination principle, the place where the item is located at the end of the transport delivering the item to the purchaser would control. Also, a threshold value of €10,000 would apply. If with regard to a distance sale, an item is imported from a non- EU country into a different EU Member State than that where delivery to the purchaser would end, the place of supply would be the place where the item is located at the end of delivery transporting the item to the purchaser. For a distance sale of an item that is imported from a non-EU country into the EU Member State where the delivery to the purchaser ends, the place of supply will shift to that EU Member State to the extent that the VAT on this item must be declared in line with the Import-One-Stop-Shop process.

Read an August/September 2020 report prepared by the KPMG member firm in Germany


Other VAT items

Other VAT developments discussed in this KPMG report include:

  • A simulation of a supply chain in the case when an electronic interface is involved
  • A change to the exemption from import VAT
  • Special regulations in the case of imports of shipments with a material value of a maximum of €150
  • Mini-one-stop-shop (MOSS) will become one-stop-shop (OSS)  

The proposed effective date of the VAT changes vary with certain measures being effective on the day after the law’s enactment and others being effective on 1 January 2021 and even on 1 July 2021.

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

  • A referral to the Court of Justice of the European Union (CJEU) from the German federal tax court (BFH, resolution of 7 May 2020, V R 16/19)
  • Restrictions in situations of a retroactive invoice correction (BFH, decision of 12 March 2020, V R 48/17)
  • The concept of a fixed establishment in VAT law (BFH, decision of 29 April 2020 – XI R 3/18)
  • Input VAT deduction in the case of import VAT (German Ministry of Finance, guidance of 16 July 2020 ‒ III C 2 – S 7300-a/19/10001 :004)
  • VAT rate reduction and single-purpose voucher

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