German VAT Reduction 2020
June 19. 2020 | News
Temporary Reduction of VAT Rates from July 1 through December 31, 2020
On 3 June 2020, the coalition committee of Germany’s CDU/SPD Government agreed on a comprehensive economic stimulus and future package. The package of measures includes a reduction of the general VAT rate from 19 percent to 16 percent and the lower rate from 7 percent to 5 percent for the period from 1 July 2020 to 31 December 2020. In the cabinet meeting of 12 June 2020, the Second Corona Tax Assistance Act was passed, which provides for the reduction of VAT. On 15 June 2020 the Federal Ministry of Finance (BMF) published its draft of an accompanying BMF letter.
What is the Current Status of the Proposed Legislation?
The Federal Ministry of Finance sent a formulation aid for a draft law to the federal ministries on 6 June 2020 requesting comments by 8 June 2020. On 12 June 2020, the cabinet then dealt with the draft law, and on 16 June 2020 the parliamentary group will discuss it. The readings in the Bundestag are planned for 17, 18 and 19 June 2020 and the approval of the Bundesrat for 26 June 2020. The BMF published a draft letter on 15 June 2020.
Regulation of changes to the VAT Act
In accordance with the draft of an accompanying BMF letter dated 15 June 2020, unless otherwise specified, amendments to the VAT Act are to be applied to goods, services and intra-community acquisitions which are carried out from the date of entry into force of the respective amending regulation (Section 27, paragraph 1 sentence 1 of the VAT Act).
Date of Application
The new VAT rates of 16 percent and 5 percent apply to supplies of goods, other services and intra-community acquisitions made between 1 July 2020 and 31 December 2020. The decisive factor for the application of these sales tax rates is always the time at which the respective transaction is carried out. The time of the contractual agreement is irrelevant, as is the time of receipt of the payment or the issue of the invoice (see section 12.1 (3) UStAE).
Adjustments to Tax Rates in Onventis – Possible Measures for Buyers
Depending on the configuration and process characteristics of your Onventis Buyer organisation, it may be advisable to adjust the VAT rates stored in the system as well as create new tax codes or adjust existing tax codes and, in the case of your own purchasing catalogues, to adjust the tax rates of the catalogue items. These changes to the configuration and process characteristics as well as the catalog master data can be carried out independently by your key users / system administrators. However, Onventis will gladly support you in the concrete determination and determination of the recommended adjustments. For this purpose, please contact our support team, who will immediately forward your request to our consulting department for further examination and contact. We will also be happy to provide you with a corresponding guide for adjusting the tax rates in your catalogue master data.
Since the sales tax is determined at the time of delivery of goods, and at the time of execution of other services and intra-community acquisitions, the tax rates contained in a purchase order, which result from the configuration and process characteristics as well as from catalog article data, serve on the one hand as a default value for invoice entry and on the other hand for the accounting planning of input tax clearing, even before the actual vendor invoice arrives. Thus, they have more of a planning character than an obligatory one. Relevant is the invoice data of your suppliers, which must contain the tax information relevant at the time of invoicing, taking into account the time of delivery or execution of services. An adaptation of the usually very extensive catalog master data is therefore not absolutely necessary in order to conform with the change in law.
Adjustment of Tax Rates in Onventis – Possible Measures for Suppliers
The area of application relevant to suppliers relate to the catalogues for buyers provided in the Onventis Open Procurement Network as well as the e-commerce (online shop) applications linked via OCI or cXML. While the shopping cart items and their tax rates transferred via OCI or cXML connection should be adjusted in your system by you, as the supplier, you can independently change the tax rates for the catalogue data hosted on the Onventis platform in the case of self-administration. We will be happy to provide you with a corresponding guide for this purpose. In cases where your catalogues have been imported by Onventis on your behalf, please contact our Support Team, who will immediately forward your request to our Catalog & Integration Services Team for further information.
Since the tax on sales/purchases is determined at the time of execution of the deliveries, other services and intra-Community acquisitions, the tax rates contained in a purchase order, which result from the configuration and process characteristics of your customer and from the catalog article data you provide to the customer, serve on the one hand as a default value for invoice entry and on the other hand for the accounting planning of input tax clearing even before the actual vendor invoice arrives. Thus, they have more of a planning character than an obligatory one. Your invoice data are decisive, which must contain the tax information relevant at the time of invoicing, taking into account the time of execution of the delivery or other service. An adaptation of the usually very extensive catalog master data is therefore not absolutely necessary in order to conform with the change in the law.