Germany: Opportunity in verifying rate of VAT on categories of goods

Germany: Opportunity in verifying rate of VAT

A case concerning what is the correct categorization of goods provides an opportunity for taxpayers to verify whether the appropriate rate of value added tax (VAT) is being applied.

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The German federal tax court (BFH) has referred a question to the Court of Justice of the European Union (CJEU) regarding the rate of VAT applicable to a supply of woodchips. The CJEU has been asked to clarify whether the supply of woodchips would subject to the reduced rate of VAT or to the general rate VAT.

The VAT Directive authorizes EU Member States to apply reduced rates of VAT and to assign precise definitions of categories of goods subject to reduced rate of VAT based on the EU Combined Nomenclature.

In referring the case to the CJEU, the BFH asked whether supplies of different types of firewood (from the viewpoint of an “average consumer”) are to be treated the same—specifically when the reduced VAT rate does not comply with the rules under the EU Combined Nomenclature, or whether the perspective of an average consumer must be taken into consideration and whether this treatment could also be raised in other cases.


KPMG observation

Companies need to consider independently verifying the correct VAT rate and when appropriate, clustering or bundling their product portfolios as well as applying (non-binding) tariff information.


Read a November 2020 report [PDF 395 KB] prepared by the KPMG member firm in Germany
 

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

  • “Internal” company is not a taxable person (CJEU, judgment of 16 September 2020—case C-312/19—XT)
  • Reduced VAT rate for the organization of techno and house concerts (BFH, decision of 23 July 2020, V R 17/17)
  • Tax liability of the recipient of a supply in a VAT grouping (BFH, decision of 23 July 2020—V R 32/19)
  • VAT treatment of vouchers (BMF, guidance of 2 November 2020)
  • Temporary reduction of VAT rates from 1 July 2020 (BMF, guidance of 4 November 2020)
  • Zero rated cross-border transports of goods relating to import and export items (BMF, guidance of 14 October 2020)
  • Qualified confirmation of foreign VAT identification numbers on 1 January 2021 (BMF, guidance of 28 October 2020)

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