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Planned legislative changes in the area of sales tax.

According to the draft bill for a so-called Annual Tax Act 2019, changes to sales tax are planned in addition to income tax regulations (see No. 4).
The regulations contain, in particular, mandatory adjustments to EU law and to the case law of the European Court of Justice.

Relatively promptly, i.e., on the day after the promulgation of the Act, the following amendments, for example, are to enter into force:

  • The special rules for determining the place of gratuitous transfers of value are to be abolished because EU law does not provide for such a special rule. The “normal” principles then apply to the removal of items: If the object of removal is transported or dispatched, the place where the transport or dispatch begins is generally decisive; without transport or dispatch, the place of handover (provision of power of disposal) is generally decisive.
    There are effects compared to the current regulation if the withdrawal takes place abroad; then no German VAT is due. However, the transaction may fall under foreign VAT law.
    Changes also arise in particular in the case of the gratuitous transfer of other services in connection with real estate abroad, because the place of the transfer of value is then abroad, e.g. if a domestic building contractor renovates his daughter’s house in Switzerland free of charge.
  • In the future, the reduced VAT rate is also to apply to books etc. in electronic form (so-called e-books). Electronic services that go beyond the function of conventional books, etc. (e.g. map material for navigation devices or apps) are not eligible.
  • The special regulation for the taxation of travel services (so-called margin taxation – § 25 UStG) is to apply in the future not only to travel services provided to private individuals, but also to those provided to entrepreneurs for their businesses.

Effective January 1, 2020, the following changes, among others, are scheduled to take effect:

  • The provisions on “chain transactions” will be harmonized under European law (new Section 3 (6a) UStG).
  • Tax exemptions for health care, welfare and social security services, and education services are revised.
  • The penalties for participation in sales tax evasion, of which entrepreneurs knew and should have known, are to be amended and strengthened.