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COVID-19 update - Indirect tax, Germany

Covid-19 is disrupting business across the world requiring tax authorities to implement rules and reliefs to support businesses through this period. We are pulling our global indirect tax resources together to create a single source of information, support and thought leadership.

What type of business is this information relevant for?

All types of businesses operating within Germany.

VAT/GST reliefs – tax authority announcements

Companies donating masks, antiseptic or goods for medical purposes to hospitals, etc. do not have to declare and pay VAT for the supply of goods. The same applies for companies, who transfer medical staff free of charge. The rule shall remain in force until the end of 2020. Aside from this the German government has not announced any specific COVID-19 VAT measures thus far.

The only special VAT measure concerns the application for the permanent extension of time for the filing of preliminary VAT returns. Companies suffering from the effects of COVID -19 that have already applied for the permanent extension of time and transferred the respective prepayment to the tax authorities can apply for a refund of the prepayment. In addition, enforcement measures (in particular, the seizure of bank accounts) or late payment penalty fees are to be waived until 31 December, 2020 in as far as the tax payment debt is due to being directly affected by the effects of the coronavirus. Companies can also apply for deferment of payment for VAT liabilities.

What ideas have you generated to support businesses?

Liquidity and cost reduction

  • Electronic invoicing is available in Germany.
  • Bad debt relief scheme:
    According to the German VAT Act, businesses generally can recover paid output VAT amounts from the tax office for made supplies, if the customer fails to pay in full.
  • Check of the supply chain (i.e. chain transactions)
  • File amended applications for permanent extensions of time to get already transferred VAT prepayments refunded.
  • Apply for the deferment of payment for VAT liabilities.
  • VAT refunds (reclaim of VAT paid in other EU member states - deadline 30 September, 2020).
  • Sale of multipurpose vouchers - VAT is due at the moment of redemption.

Workforce dynamic

  • According to German VAT laws, businesses generally are allowed to claim any VAT amounts on business related expenses reimbursed to employees working at home.

Supply and demand shock

  • Penalty/compensation payments are not subject to German VAT.
  • There are no changes to the rules concerning non-established taxpayers registered in Germany.
  • If customers cancel contracts, the VAT that already has been accounted for can be reclaimed from the tax authorities if it is refunded to the customer.
  • Companies can apply for a deferment account at the competent central customs office to extend payment deadline of import duties.
  • Companies should try to carry out sales covered by the reverse charge mechanism to avoid VAT liabilities.

Call to action

VAT may be a good and effective option for getting liquidity for your business. To be updated on any VAT - check if changes have been made (e.g. Change of business model, for example an online store). For further information, please visit the RSM Germany Coronavirus Resource Center by clicking here.

Contact details:

Tim Zumbach
Senior Manager Indirect Tax

T: +49 89 29064 152
M: [email protected]

AUTHOR

tim_zumbach - Copy.png

Tim Zumbach
Senior Manager Indirect Tax, RSM Germany
E: [email protected]