The significant ruling by the German Federal Court
On October 10th 2019, the German Federal Court published a new rule that will strengthen the rights of foreign companies to claim VAT refunds from Germany. The new ruling from the German Federal Fiscal Court states that an applicant for a VAT refund (namely the foreign organisation) can keep the right to interest without violating the obligations to the state, as per Section 61(6) of the Umsatzsteuer-Durchführungsverordnung (UStDV), the law which addresses value-added tax rebate.
Previously, as per section 61(6) of the UStDv, organisations’ VAT returns were subject to interest, if they did not file their documents and remuneration on time. This includes requests for additional documents from the Bundeszentralamt für Steuern, also known as the Federal Central Tax Office, within a specified period – a time period that can be extended by the Central Tax Office. The German Federal Fiscal Court has now ruled that the applicant can keep his right for interest without violating the obligations to cooperate with Section 61(6) of UstDV.
What does the rule mean?
The ruling gives far more freedom to more local and foreign companies because it essentially gives organisations no incentives to hand in supporting documents. Essentially, foreign companies no longer operate under a tight deadline because there are no penalties incurred, whether they submit supporting documentation within the time period or not because they do not lose any rights under the German law. The German tax authorities can afford this flexibility because, according to the EC, they are not liable for paying the interest if documentation is submitted in time due to Section 61(2).
The significance of the ruling
The ruling gives far more freedom to more foreign companies as there simply are no incentives to hand in supporting documents on time. Essentially, foreign companies no longer operate under a tight deadline because there are no penalties incurred, whether they submit supporting documentation within the given timeframe or not because they do not lose any rights under German law. The German tax authorities can afford this flexibility because according to the EC, they are not liable for paying the interest if documentation is submitted in time due to Section 61(2).
How will this affect your VAT rebate payments
Naturally, firms operating outside Germany stand to gain tremendously from the new ruling because they no longer have to worry about paying interest for their rebates. The new law makes the entire rebate process much easier. Furthermore, organisations will have to also reconsider the VAT reclaim procedures to Germany because they are no longer (technically speaking) subject to the same penalties as before.
To make adjustments to the VAT rebate system, organisations need to consult a VAT specialist or a third-party organisation that specialises in VAT. A third-party can help organisations navigate the proper legal channels to have their VAT rebate applications looked at again and have the cases reviewed. The right organisation can help you make the transition relatively easily.
How can organisations adjust their processes
Some organisations may already have VAT specialists working for them, whose job it is to work out the legal kinks of Germany’s VAT rebate laws under these new changes. For such specialists, they are better off investing in the right tools and software to optimise decision-making. Having to make the connection between the new law and how it affects the business is a challenging gap to close, and VAT specialists will need the best tools to help them make the judgement call.
This is where VAT4U can be incredibly helpful for VAT specialists. Several features in the cloud-based software will help VAT specialists in their tasks, including secure servers to keep data safe, fast processing, the ability to process mass data and connections to existing ERP systems – making data importation even easier.
If you are an organisation trying to navigate the new, unfamiliar waters of VAT refund, then VAT4U can be of great assistance. Organisations will be glad to know that the platform is GDPR-compliant, meaning that it functions in accordance with all EU laws. The VAT4U platform can even scan documents for non-issue compliance before documents are even sent to the EU’s online portals through VAT4U. If you are an EU-based organisation, getting successful rebates in the wake of Germany’s new laws has now become a much easier process.
Dr. Fabian Völkel: April 28, 2022 at 11:20 AM
Julia Lenz: April 13, 2022 at 4:00 PM
