Blog Kanzlei Beißwenger
VAT 2020 – New Seminars
Every year there are new regulations and legislative amendments in the domain of VAT and the control services of the tax authority survey very intensively and frequently, whether all statutory requirements are complied with. A breach has consequences: higher taxes are assessed and/or input tax is cancelled.
Therefore, it is very important that each adviser – whether VAT-expert or generalist – is permanently up-to-date.
In our professional seminars we inform you about all new features for 2020 and transmit you all the knowledge required for a sure handling of all VAT-issues. Further details on the content of our VAT seminars you will find under “Seminars”.
Register now to one of our professional seminars. We are looking forward to welcoming you.
Professional Seminars VAT 2020
Provider: Beißwenger Academy in Karlsruhe
Date: VAT – Basics for beginners
29 and 30 september 2020 09.00 – 16.00 h
VAT for advanced users
13 and 14 october 2020 09.00 – 16.00 h
Lecturer: Armin Beißwenger, Graduate in Tax Administration
Lawyer / Specialist Lawyer for Tax Law
Advanced training courses for assistant tax consultants 2020 in Karlsruhe, Germany
Continuing Training Seminars
Organiser: Beißwenger Academy in Karlsruhe
Date: 29 and 30 september 2020 09.00 – 16.00 h
13 and 14 october 2020 09.00 – 16.00 h
Lecturer: Armin Beißwenger, Graduate in Tax Administration
Lawyer / Specialist Lawyer for Tax Law
Offer of Courses 2020
New courses at out Academy
Learn a new language or improve your knowledge of a foreign language. Each new language enriches your professional and social life and opens new possibilities for you. Our Academy offers the adequate courses for you.
The EU policy is oriented towards multilingualism and has two facets:
Striving to protect Europe’s rich linguistic diversity
Promoting language learning
Every European should speak two languages in addition to their mother tongue. The EU supports language learning because:
Better language skills enable studies or work abroad
Speaking other languages helps people from different cultures understand one another which is essential in a multilingual, multicultural Europe
Take advantage of our offer of courses. Improve your language skills and your chances on the employment market.
In spring 2020 the following new courses start:
French for beginners
English for beginners
English for advanced users
Register now and ensure your seat. (https://akademie-beisswenger.de/fremdsprachenseminar-karlsruhe)
We will be glad to welcome you.
Requirements for Cash Desks
During a company audit the financial authorities focus mainly on the cash register and examine closely the regularity of the cash management, in particular with companies using cash to a large extent like restaurants and retailers. If a cash check is not possible, there is a serious formal defect which leads to supplementary estimates of up to 10 % of the annual turnover plus safety margin. In the worst case criminal proceedings can be opened.
The following should be noted:
- 1. Obligations as regards the keeping of a cash register or a cash book
Every person or entity required to keep books must keep accounts that also include the daily records of cash receipts and expenditures (cash book). Accounting entities are all merchants but also business people having an annual turnover of over 600,000 EUR or an annual profit of over 60,000 EUR.
- 2. Rules and forms of cash management
The legal provisions do not require a certain type of cash register. The taxpayer may decide freely whether he uses an open cash desk or a cash register or PC register.
Open cash register
Users of an open cash desk should pay special attention to a consecutively numbered daily cash desk report. A correct and verifiable calculation of the daily receipts must be possible by back calculation from the counted cash balance.
Cash or PC register
Basically all tax-relevant data, including electronically generated invoices, must be stored unchangeably and completely.
The obligation of individual recording means that all sales transactions are recorded when all sales of goods are registered with a modern PC register, including: date, time, seller, item, amount, unit price and full price.
- 3. Consequences of an incorrect cash management
If there are formal or substantive deficiencies that are so essential that the accounting can no longer be classified as orderly, the financial authority can reject the accounting and refuse its recognition.
- 4. Law for the protection against manipulation of digital basic records (Cash desk law)
By the end of 2016 a new cash desk law was adopted which plans the changeover from electronic cash registers to a forgery-proof system. From 2020 on so called electronic registration systems must be protected by a certified safety device, so that the deletion of sales transactions becomes impossible.
In addition to the already existing instruments for tax control, on January 1, 2018 the possibility of a cash desk follow-up check was introduced – that is an unannounced inspection by the financial authorities to detect possible tax fraud.
Incentives – exempt from income tax and social security contributions
Reward your employees and save taxes
As an employer you want to reward your employees for their good performance and motivate them to higher commitment for your company.
A good possibility to achieve this goal is by granting a wage increase. However, the increase has a certain disadvantage: it leads to higher income tax and a higher social security contribution for both you and him. That means that the employee finally gets only a part of the granted wage increase.
An alternative are incentives that can be granted free of income tax and social security contribution and thus are advantageous for both employer and employee.
Possible additional salary components are:
- Benefits in kind of maximum 44,00 € per month
- Private use of a company car
- Transportation allowance for travel by public transport between domicile and first workplace
- Private use of computers, data processing equipment and telephones (even at home); the equipment remains property of the employer
- Subsidies of up to maximum 500,00 € per year for certified performances to improve the general health (e. g. courses for back exercises, for healthy nutrition, for stress management etc.)
- Childcare costs for children not yet of school age
- Parking at no costs or at reduced costs
There are multiple possibilities for a reward.
We will be pleased to advise you on the most profitable options for you and your employees.
New feature beginning with July 1st, 2019: “Übergangsbereich” = Transition Zone
Starting with July 1st, 2019, the “Gleitzone” (low-wage transition zone) becomes the new “Übergangsbereich” and this means plenty of changes for the wage accounting.
Employees in the “Gleitzone” (part-time employees earning between 450.01 € and 850.00 € per month) now become employees in the new “Übergangsbereich” (part-time employees earning between 450.01 € and 1,300.00 € per month). These employees are also called “Midi-Jobbers”.
But attention: Apprentices and short-time workers are not considered as workers in the “Übergangsbereich”, even if their wages are within the corresponding limits.
Important for the wage accounting:
The employer’s contributions to the social security are calculated from the full wages.
The employee’s contributions to the social security are calculated from the reduces wages. The reduced wage is calculated with a special formula. Important basis for this formula is factor F, which is published every year.
If you have not agreed upon a fixed wage with your employee, you must estimate anticipatory and precisely the yearly wage of the employee. One-time payments (Christmas bonuses, holiday pay, but no overtime allowance or premium payments) must be added and then the sum divided by 12. If the monthly wage thus calculated is within the range from 450.01 € to 1,300.00 €, your employee is in the transition zone “Übergangsbereich”. In case of a rise within the year, the wage must again be calculated for the future.
The reduced wage for the calculation of the social security contribution is calculated as follows:
1.1288588 x wage – 167.51647 = reduced wage
The thus calculated reduced wage is the assessment basis for the calculation of the full social security contribution.
The monthly contribution to the social security is calculated as follows:
- Calculation of the full contribution (based on the reduced wage)
- Calculation of the employer’s contribution (based on the full wage)
- Calculation of the employee’s contribution (full contribution - employer’s contribution)
Advantage for the employee: he pays the reduced social security contribution but is entitled to pension based on the full contribution.
Advantage for the employer: he saves additionally, as beginning with July 1st, 2019 the employer’s allocation U1 (for disability), U2 (for pregnancy and maternity protection) and U3 (for insolvency) is calculated for all employees in the transition zone based on the reduced wage.
Principle of the Unity of Services
In order to determine the VAT and apply the tax law correctly, the taxable services must be assessed properly.
Most of the services are composed of several single services and it must be determined whether the different steps are to be treated separately or as a unity.
This assessment is important for the determination of the place of service and the time of service as well as for the application of tax reduction or tax exemption.
Unity of services
The assessment must be done from the objective perspective of the average consumer. A distinction is drawn between:
Inseparable services with a uniform assessment
The different parts of a service are intrinsically connected so that they can only be booked as a whole. A separation would not be realistic.
Separable services with main service and secondary service(s) and a uniform assessment
One part of the service is decisive and considered as main service, the other parts are dependent secondary services – thus a uniform assessment can be made.
(Important: The parts of the service can be separated but are not equivalent.)
Separable services with separate assessments
If equivalent single services are combined, they are considered as individual services even if they serve a uniform business purpose.
Taxation of these services
Depending on the assessments, the services are taxed differently:
Inseparable services with uniform assessments are subject to a uniform tax rate (European Court of Justice, act of 18.01.2018, C-483 and German Financial Court of Justice, act of 02.08.2018 – V R 6/16)
Separable services with main service and secondary service(s)
The applicable principle is: The auxiliary services share the same tax treatment as the main service.
Separable services with separate assessments
These independent services are taxed individually.
An all-inclusive holiday tour must be split into the individual services, assessed correctly and taxed accordingly:
- access and return travel
- overnight with breakfast
- use of sauna
Turnover Tax Advance Return for small Enterprises
Exemption from the obligation to submit the advance return
If the taxes for a small enterprise for the previous year lie below 1000.00 €, the financial authority may grant the enterprise an exemption from the obligation to hand in the advance-turnover tax return and advance payment (§ 18 sec. 2 let. 3 UStG – German VAT Act).
This exemption is not valid in the case of the founding of a company, in the case of a thread to the tax claim or in the case of an expectation of higher taxes in the future.
Now the VAT Application Decree has been amended: a referral to § 18 sec. 4 a UStG (small enterprises as supplier of vehicles) was introduced and as a consequence the exemption from the obligation to hand in the advance-turnover tax return will no longer be granted, if:
Intra-community acquisitions are made
Services from abroad are received
The enterprise is the last buyer in an intra-community triangular trade
The enterprise is a supplier of vehicles
In practice the consequence will be that the financial authority will no longer grant the exemption from the obligation to hand in the advance-turnover tax return to companies having a VAT ID number or respectively will cancel it. If the VAT ID is no longer needed, it cannot be returned and the advance-turnover tax return must be handed in, otherwise a default fine is due.
Enterprises that ware granted an exemption from the obligation to hand in the advance-turnover tax return have to take into account a cancellation by the financial authorities.
The exemption already granted remains valid until it is revoked.
European VAT Act
Harmonisation of the provisions
Already with the realisation of the European Single Market on January 1, 1993, the final goal of a harmonised Single Market was defined as the taxation in the country of origin (art. 402, sec. 1 Directive on the VAT System). This means, supplies to another member state of the EU (e.g. from Karlsruhe/Germany to Paris/France) are taxed exactly like national supplies (e.g. from Karlsruhe/Germany to Paderborn/Germany).
The supplying trader pays VAT at the place of origin (Karlsruhe/Germany) and the beneficiary claims the input tax at the place of receipt (Paris/France respectively Paderborn/Germany).
The European Commission has changed these directives and defined a new goal (art. E-402 Directive on the VAT System): taxation in the country of destination. The supplying trader is liable for VAT in the country of destination.
From this results the obligation of the supplying trader to register for VAT purposes in every member state of the EU. In order to avoid this registration obligation, an expansion of the One-Stop-Shop principle is envisaged: the trader registers in only one member-state of the EU and declares from there his Pan-European turnover. The possibility to claim the input-tax for supplies received in another member state of the EU via the OSS-registration is still not clarified.
The harmonisation of the legal provisions on the VAT is realised within the EU by legal regulations and directives.
The regulations of the EU are valid directly and immediately for each member state and determine immediate rights and obligations for the citizens.
The directives of the EU oblige the member states to implement the provisions of the directives into national law.
The European Customs Law is regulated in a binding way throughout the European Union by a legislative decree (Decree of the EU No. 952/2013).
The European VAT Act is depicted by a directive (Directive no. 2006/112/EG) and the VAT Implementing Provision no. 282/2011.
In the domain of VAT all member states of the EU have the right to describe the provisions of the Union law with their own terminology and national legal particularities. The Union law speaks about “value added tax”, the German VAT law speaks about “turnover tax”; the “taxpayer” is called “entrepreneur” in Germany etc.
The national legislator has only insufficiently met his obligations of harmonisation. Especially in the field of tax exemptions there is a large discrepancy between the provisions of § 4 UStG (German VAT Act) and the legal regulations of art. 132 and 135 of the Directive on VAT of the EU.
Within the task of harmonisation, the ECJ (European Court of Justice) has approved the direct application of the Union law to the respective national VAT laws.
EU Data Protection and Transparency Registry of the EU
How large is the gap between the data of an individual person and the data of a company in the domain of data protection?
In the case of personal data of a private person, data protection is interpreted very strictly.
- Each entrepreneur must make sure that a personnel file is handled confidentially according to data protection rules and protected against unauthorised access according to § 9 German Federal Data Protection Act
- According to the DPBR the employee has a right to information about the data stocked about him, a right to the rectification, blocking and deletion of his data. Thus the person concerned has a certain control over the stocked data concerning him
In the case of companies, things are quite different. In the EU the data protection standards for companies – mainly family-owned companies – fall by the wayside.
One reason is the transparency registry of the European Union.
- This list is intended for the registration of the main shareholders of companies. Beginning with 2020, the transparency registry will be accessible to everybody. In addition, the profit and control data of large companies will be published.
- The disclosure obligations increase constantly and they harm family-owned companies, as here the personal and professional domains are tightly linked together.
- The publication and uncontrolled distribution of company data profit the competitors from outside the EU. Investors can choose potential takeover candidates without disclosing their own data.
- Based on the profit and control data published in the public transparency registry, conclusions can easily be drawn on the personal income level and financial situation of the shareholders.
Is this still compatible with data protection?
How can the fight against money laundering and financing of terrorism on one side and the fiscal secret and the claim of family-owned companies on data protection on the other side be brought into compliance?
On the national level and in the EU there still remains much to do in this matter.
VAT Law – Proper Invoice
Letter of the Federal Ministry of Finance (BMF) dated Dec. 7, 2018, III C 2
According to § 14 section 4 sentence 1 no. 1 VAT Act, an invoice entitling to reclaim input tax must comprise the full address of the providing entrepreneur and of the service recipient.
Based on several rulings of the Federal Court of Finance on the issue of proper invoicing (XI R 20/14 of 13.06.2018; V R 25/15 and V R 28/16 of 21.06.2018), the Federal Ministry of Finance (BMF) has amended the VAT Application Decree of 01.10.2010 (Federal Tax Gazette Part I p. 846): The economic activity of the entrepreneur need not be carried out at the address indicated in the invoice. It is sufficient if the providing entrepreneur respectively the beneficiary can be reached under the mentioned address.
Therefore, even a P.O. Box address, a postcode address or a c/o address meets the requirements of the VAT Act regarding a full address for an invoice entitling to reclaim input tax.
Medical Hotline = Tax-exempted activity?
Medical treatment in the domain of human medicine, carried out in the frame of medical and paramedical professions, is principally tax-exempted.
Does this also apply to consulting services by phone, carried out by a limited liability company with so called health coaches on behalf of statutory health insurances?
The Federal Court of Finance doubts that these services of health telephone are exempted from VAT, as the consultancy is not based on a previously made medical statement and moreover it is not certain that the consultancy is followed by a medical treatment.
That is why the Federal Court of Finance has called on the European Court of Justice to clarify the issue. The ECJ is to clarify:
- if a consultancy by phone of the insured persons on questions of health/disease on behalf of the health insurance company is a tax-exempted activity, and
- if it is sufficient for the requested professional certificate of competence that the consultancy ba phone is carried out be health coaches (medical assistants, nurses).
(Federal Court of Finance, ruling of 18.09.2018, XI R 19/15)
We will inform you about the results.
Labour Law: Low Performer
How do you as an employer handle this issue?
You have an employer who does not deliver the quantity or quality of the work determined by the employment contract. This situation strains both the other employees in your company and the direct manager.
For you as an employer this means you must take constructive measures before you can consider steps under labour law.
What can you undertake when you observe a reduced performance in order to approach the employee to the expected performance and thus avoid dismissal?
One first important instrument is the performance review, in which you identify the exact performance expectations, give the employee a clear feedback on his performance and conduct and discuss the common steps towards a solution of the problem.
In a follow-up discussion you analyse together to which extent the performance has improved and the objectives agreed have been reached. If there are no positive results, steps under labour law must be considered. This is not easy, as neither law nor jurisdiction have finally defined the issue.
The expectations of the employer regarding the extent and the quality of the employee’s work performance are principally based on the employment contract as well as on the continuously given oral and written instructions.
Based on the employment contract, the employee owes his employer according to § 611 sentence 1 BGB (Bürgerliches Gesetzbuch – German Civil Code) the “performance of the agreed services”. The assessment criteria for the “agreed services” regarding the quantity and quality are – if no individual contract or collective bargaining regulations intervene – the personal performance capacities of the employee. This means, the employee is only obliged to perform the job agreed upon in the employment contract.
The Bundesarbeitsgericht (German Federal Labour Court) stipulates: “The employee is obliged to do, what he is supposed to do, and do it as well as he can.”
He who is able to perform above average, is obliged to deliver an above-average performance
He who is able to perform only below average, fulfils his work obligation even with a below-average performance.
You as an employer must identify whether the low performer in your company is not able to or is not willing to deliver the contractual agreed performance.
If there is no will, you as an employer can articulate a warning and, if necessary, an ensuing dismissal for reasons of conduct due to defective performance. This defective performance is the non-fulfilment of the agreed services and entitles the employer to a prorated cutting of wages.
If there is no ability, you as an employer have the possibility to reinstate the employee in another department of your company or to balance the difference between performance and remuneration by a salary adjustment. A last step would be a person-related dismissal.
The correct personal and legal assessment and handling of an employee with reduced performance is not without difficulties and requests thorough knowledge of labour law in order to take the right steps.
We will be glad to advise you. Please contact us.
Tax exemption for emergency on-call services
By its jurisdiction VR 37/17 dated 02.08.2018 the Bundesfinanzhof (BFH – Federal Fiscal Court) has decided, that emergency services, too, are subject to VAT tax exemption for curative treatment even n the case when the services are not rendered to persons or health insurance companies (ex. Presence and operational readiness at sports events or other similar events). It is important that the curative care has therapeutic purposes.
According to § 4 no. 14 a UStG (Umsatzsteuergesetz – German law on VAT) curative treatments in the domain of human medicine are generally exempt from taxes if they are rendered within the framework of services by a doctor, a dentist, a non-medical practitioner, a physiotherapist, a midwife or a similar healing service.
According to the jurisdiction of the European Court of Justice the diagnose, treatment and healing of diseases or health problems are part of the curative treatment. Services rendered for the purpose of prevention, protection and maintenance or recovery of the human health also belong to the curative treatment in the domain of human medicine.
Services that have a therapeutic purpose are curative treatments and underlie the tax exemption. It is not relevant if the service is rendered to patients or health care companies, as the person-related exemption from taxes refers to the service provider and not the service beneficiary.
The emergency services of a physician rendered to detect any potential health risks at an early stage and immediately start appropriate measures in order to ensure the best possible success of a (subsequent) treatment are tax-exempt treatments in the domain of human medicine according to § 4 no. 14 a UStG (BFH – Federal Fiscal Court Jurisdiction of August 2, 2018 – V R 37/17; published on January 2, 2019).
Taxable persons should take into account this jurisdiction and invoice the emergency services without VAT.
Tax Legislation 2019
New features and amendments in the tax legislation 2019
The complexity of the German tax law is well known and the constant changes of the regulations oblige us to inform ourselves permanently about the current developments, new reforms and jurisdictions.
We have summarised the amendments in the German tax legislation 2019 and provide you a brief overview of the main tax relevant provisions for 2019.
The “Law for the prevention of VAT deficit in connection with the trade with goods on the internet and the amendment of further tax relevant regulations” (brief: Annual Tax Act 2018”) bundles several legal amendments in one reform.
- Topic “Voucher”
The new regulation in the VAT law regarding vouchers implements the Voucher Regulation of the EU into national law. As of 1 January 2019, a difference will be made between “single-purpose vouchers” and “multipurpose vouchers” with respect to the time the taxes arise.
- Topic “Place of Performance”
If the services for telecommunication, radio and TV as well as other electronically rendered services provided to users living in other Member States are below the threshold value of 10,000 EUR, the service provider may tax the services according to § 3 a sec. 5 UStG (German VAT law) in his own country.
- Topic “Remuneration”
The notion of “remuneration” in § 10 sec. 1 UStG gets a new definition and is adapted to the wording in article 73 of the Directive on the common system of value added tax.
- Electronic Marketplaces
In order to prevent VAT deficit in connection with trade with goods on electronic marketplaces on the internet, as of 1 January 2019 there are new registration obligations for operators of electronic marketplaces. According to § 22 f UStG the operator has the obligation to keep register of the trader’s registration and to present the certificate of registration upon request to the financial authorities. If the trader is not registered and does not pay VAT, the operator is liable.
- Further new regulation
The Annual Tax Act 2018 comprises among others new regulations on the following topics:
- company pensions enforcement act
- financial promotion of electronic mobility
- tax exemption for profits from renovation
- tax exemption for job-tickets etc.
The “Law for the enforcement and tax relief of families as well as for the amendment of further tax regulations” (brief: Family Relief Act) increases the child allowance, the child tax credit and the basic tax-free allowance.
The Federal Government has also published a law on financial support regulations for the exit of the United Kingdom of Great Britain and Northern Ireland (Brexit Tax Support Act) in order to avoid fiscal disadvantages for companies caused by the Brexit.
We continuously keep ourselves informed about all the new regulations, amendments, reforms and jurisdictions. War are ready to advise you and to give you all the necessary support to manage your tasks. Please contact us.
Avoidance of corporate tax
New EU rules to eliminate the main loopholes come into force on 1 January 2019
On 1 January 2019 new rules enter info force that are intended to eliminate the most common corporate tax avoidance practices.
All Member States shall apply new legally binding anti-abuse measures that target the main forms of tax avoidance practiced by large multinationals.
All Member States will tax profits moved to low-tax countries where the company does not have any genuine economic activity.
All Member States will limit the amount of net interest expenses that a company can deduct from its taxable income.
All Member States will be able to tackle tax avoidance schemes in cases where other anti-avoidance provisions cannot be applied.
Taxation of Bitcoins & Co.
Cryptocurrencies are other assets in the meaning of § 23 (1) sentence 1 no. 2 Income Tax Act. When buying or selling within the period of one year, taxable private disposals are reached. The profit from private sales transactions is calculated by opposing the sales price and the purchase price minus the professional expenses (for example: trading costs) in the meaning of § 23 sentence 3 EStG – Income Tax Act).
Capital gains are only taxed when they exceed the exemption limit of 600 EUR in the calendar year (§ 23 (3) sentence 5 EStG). If the capital gains exceed this limit, the entire gain is taxed.
Capital gains from crypto transactions are not to be considered as capital income that is subject to settlement tax regardless of the holding time. Particularity: The mere exchange from one cryptocurrency to another cryptocurrency is taxable. This applies also when a cryptocurrency is used as means of payment for items and services. In these cases, it is a taxable exchange.
Losses can only be offset against other private disposal gains achieved in the same calendar year. A similarity of transactions is not required. Speculative gains from property transactions for example can be offset against speculative losses from cryptocurrency transactions. Balancing with other positive income is not permitted (§ 23 (3) sentence 7 EStG). Among spouses gains and losses may be balanced. In case of theft or hacker attack losses cannot be taken into account.
In its letter of February 27, 2018 the Financial Administration states that based on the judgement of the European Court of Justice of October 22, 2015, Bitcoins and other cryptocurrencies are treated like other legal means of payment. The acquisition or sale of Bitcoins has no financial impact for a private trader. The use of cryptocurrencies as a means of payment is not subject to VAT. The assessment basis is the value of the cryptocurrency at the time of turnover. The provider must record the last published selling rate. The mining, that is the creation of new Bitcoins is not a taxable operation according to the Federal Ministry of Finance. The selling or exchange of these Bitcoins is tax-exempt (§ 4 no 8b UStG – Umsatzsteuergesetz – German law an VAT).
An electronic wallet is used for the storage of virtual currencies. Any incurring charges for such wallets are other assets which are taxable if the place of performance is in the country. For the entrepreneurial beneficiary the recipient principle is applicable (§ 3 a sec. 2 UStG) whereas for the private beneficiary the place of residence is decisive (§ 3 a sec. 5 UStG).
New Website – Seminars on VAT
As a tax consultancy we have worked successfully for our clients for many years.
We are determined to pass on to you our established expertise, our long-term experience and our extensive knowledge in the field of turnover tax.
In our successful Beißwenger Academy (https://akademie-beisswenger.de) we offer training seminars in the domain of turnover tax. The seminars for beginners are intended for “beginners” with little experience in the field of VAT whereas the seminars for advanced users offer deeper insights and all law changes for “VAT experts”.
The seminars are diverse and informative. Theoretical explanations alternate with practical exercises. The knowledge gained in our VAT seminars gives you security in the handling of VAT issues, keeps you up-dated and helps you to master your daily tasks lawfully and successfully.
Retroactive joint assessment of same-sex couples
The Financial Court of Hamburg decided that married couples that changed their registered civil partnership into a marriage may apply for joint assessment to income tax even for years, for which the individual assessment became definitive.
In the case of this judgement two partners filed, who established a registered partnership in 2001 and transformed it into marriage in 2017. They applied for joint assessment beginning with the year 2001. The Finance Court agreed to the request.
Tax assessments may be changed if an event occurs that has a tax relevant impact on the past: a so called retroactive event (here: Eheöffnungsgesetz – German law regarding same-sex marriage). Here a four-year appointment period must be observed. In the case of retroactive events the period begins with the end of the calendar year in which the event occurred, here: with the end of the year 2017.
The income tax law is governed by the accrual principle. If the employee is actually paid wages, the income tax is due on the amount of money received.
The social security contribution is governed by the principle of origin: it occurs and is due regardless of an actual payment of wages by the employer. The amount of the social security contributions depends on the wage the employee is legally entitled to.
The amount of the legally due wage results from the contract of employment or the collective wage agreement. If the wage actually paid by the employer to the employee lies below the wage the employee is legally entitled to, the resulting difference is considered a phantom wage or fictitious wage.
The employer must pay social security contributions for the phantom wage as well and he must deliver both the employer’s contribution and the employee’s contribution to the health insurance company.
The employer will be liable to prosecution if he does not pay the contributions due to the health insurance company. Here the different legal assessment of the employer’s contribution and the employee’s contribution is to be noticed.
The employer is liable as soon as he fails to pay the contributions due according to § 28d SGB IV (Sozialgesetzbuch – German social security law) to the health-, care- and pension insurance companies (§ 266 a sec. 1 StGB, Steuergesetzbuch – German Tax Law).
Employees’ contributions must be paid regardless of a payment of wages. Decisive is only the obligation to pay wages. The mere non-payment of the employee’s contributions is liable to prosecution.
The mere non-payment of the employer’s contributions alone is not sufficient for punishment (§ 266a sec. 1 cl. 1 and 2 StGB). Fraud similar acts (wrong or incomplete information or the concealment of facts relevant for social security) are preconditions for incrimination.
The withholding of employees’ and employers’ contributions is financially extremely disadvantageous for individual companies or small handicraft businesses because of the very long limitation periods.
An offence according to § 266a StGB comes under the statute of limitation five years after the end of the act of offence. The act of offence ends when the obligation to pay social security contributions is terminated by the payment of the contributions or by the absence of the person owing the contributions. The end of the offence and the beginning of the period of limitation are determined by §25 SGB IV.
Sec. 1: “Entitlements to contributions come under the statute of limitation four years after the end of the calendar year in which they became due”.
Sec.2: “Entitlements to contributions withheld intentionally come under the statute of limitation thirty years after the end of the calendar year in which they became due”.
This results in the worst case in a period of limitation of 5 + 30 + 1 = 36 years!
Regarding the limitation of the liability to pay contributions there is a huge difference between business partnerships and individual companies.
Baukindergeld – A government grant scheme to support families building homes
Since September 18, 2018 the “Baukindergeld” can be applied for via the grant-portal of the KfW-Bank.
Who is entitled to the “Baukindergeld”?
The subsidy is granted to families and single parents with children. The following conditions must be met:
Children under the age of 18 live in the household for whom the applicant, his spouse, his life partner or registered partner receives child allowance
The purchase contract is signed after 01.01.2018 or the building permit is granted after 01.01.2018
The residential property is the sole residential property on the record date (purchase contract or building permit)
The residential property is in Germany
The applicant himself moves into the house/apartment or continues to live there
The taxable household income does not exceed 90,000 Euro per year, plus an extra raise of 15,000 Euro for every additional child
Example: A family with two children
taxable household income per year: EUR 90,000
allowance 2nd child: EUR 15,000
max. income EUR 105,000
The taxable household income is the average from the income of the second and third year before application. The capital income taxed with settlement tax (§ 32 d sec. 1 EStG – German tax law) and the income taxed at a flat rate (i.e. mini job) are not to be considered.
How high is the amount granted?
The support granted amounts to 1,200 Euro per child per year payable for a period of max. ten years. During this period of support, the residential property must be continuously used for own residential purposes.
Example: A family with two children
subsidy for 1st child: EUR 1,200 per year x 10 years = EUR 12,000
subsidy for 2nd child: EUR 1,200 per year x 10 years = EUR 12,000
max. subsidy EUR 24,000
The application is only possible online via the grant portal of the KfW-Bank. A registration is requested and deadlines must be observed. The applicant will be informed on the receipt of application.
Payment of the grant
After a successful examination of all documents, the KfW-Bank will pay the grant in the account of the applicant. The date for the first payment will be announced in a payment notification. The grant will be paid out for 10 years. The “Baukindergeld” does not have to be refunded.
Advantages and disadvantages of the government grant scheme
The “Baukindergeld” or help-to-build/buy subsidy is highly controversial.
The supporters outline several advantages:
- affordable housing for young families
- instrument against poverty in old age
- demand increases in cheaper, i.e. rural areas
The opponents outline many disadvantages:
- there is no social justice, as low-income families with children who have no asset and
therefore cannot afford to buy housing of their own do not profit from this government grant
- due to this grant scheme the demand for building sites will increase and therefore the real
estate prices will increase equally. Thus the intended impact of the help-to-build/buy subsidy
will be neutralized.
- only families who would build/buy anyway profit from this grant scheme and this leads to
- there will be no additional building in large cities with severe housing shortage
- the “Baukindergeld” must be supported by several additional measures (e.g. reduction of the
real estate transfer tax, reduction of the notary and broker’s fees, government guarantee schemes)
in order to reach the desired effect: increase the homeownership rates among families with
EU - VAT: Generalised Reverse Charge
According to the new EU reform of the value added tax system, through the reverse charge procedure the tax liability may be transferred from the service provider to the service beneficiary if he is a Certified Taxable Person.
On October 2, 2018 the EU Council approved a proposal that provides limited exceptions from the general VAT rules in order to support member states that are extremely affected by value added tax fraud with trans-border turnover. A frequent form of fraud is the “carousel” or “missing-trader” fraud: supplies of goods or services are bought and resold without VAT being paid.
According to the existing rules the reverse charge mechanism may be applied temporarily already now, but not in general; it is limited to a list of sectors. Thanks to the new directives, the member states affected most by the VAT fraud may use a limited general reverse charge.
Conditions for the application of the reverse charge mechanism:
- In the affected Member State, the share of carousel fraud in the VAT gap amounts to at least 25 %
- The Member State sets up electronic reporting duties for all taxpayers
- The Member State applies the generalised reverse charge only to domestic supplies of goods and services that are above the threshold value of 17,500 EUR per turnover
- The Member State makes an application and the EU-Council approves it
The application of this measure is subject to strict safeguards of the EU and is limited until June 30, 2022.
This new directive is a short-term solution for the containment of VAT-fraud with intracommunity turnover.
The EU works on a new VAT system for the trans-border traffic of goods that provides a “taxation in the Member State of destination.”
New deadlines for the submission of the tax declaration
Beginning with the fiscal year 2018 a new deadline for the submission of the tax declaration is valid. Your tax declaration must be submitted to the tax authority by July 31, 2019.
If you mandate a tax consultant with the preparation of the tax returns, the deadline is prolonged till February 28/29 of the year thereafter.
Example: tax declaration 2018 - deadline February 28/29, 2020
The tax consultant is entitled to a longer deadline as he requires more time for a global consultation.
It should also be considered that the tax authority has the possibility to request the tax declaration before the deadline for tax consultants. In the case of such a request in advance, the tax consultant disposes of at least 4 months for the preparation of the tax declaration.
Petrol vouchers from the employer for several months in advance
If the employee receives from the employer petrol vouchers for several months in advance, the entire value of the nonmonetary remuneration is considered as received with the handover of the vouchers. It is not relevant whether the employer and the employee have agreed that only one voucher per month (44 € exemption limit) may be used. The financial authority estimated that the exemption limit was exceeded and taxed the vouchers at a flat rate of 30 %.
The financial court of Saxony approved the decision of the financial authority, as the employer has no influence on the time of redemption of the vouchers after their remittance. Agreements between employer and employee are of importance for the employment law only, but have no influence on the fiscal estimations.
News on Child Allowance
Child allowance is applied for at the family insurance fund (Familienkasse). Entitlement to receive child allowance exists till the age of 18 years of the child. It may be extended to the age of 25 years, provided the child goes to school, makes a vocational training or studies.
Increase in child benefits
Every further child
Increase in tax-free child allowance
Tax-free child allowance
Total(incl. child care deduction of 2.640 €)
Selling Products in the EU
The goods of businesses trading in Europe can move freely within the EU Single Market - without any extra costs or quantitative restrictions (free movement of goods).
Customs formalities must be completed when goods are imported or exported between the EU and any non-EU country.
The traders must ensure that their products meet the EU requirements to protect human and animal health, the environment and consumers’ rights and also observe the rules and specifications that are harmonised within the EU.
If you export and/or import within the EU of more than a certain value, you will have to provide a statistical report on your intra-EU trade flow.
Every year the EU countries set the thresholds above which you must report.
If your imports/exports of the previous year exceeded that threshold, then you must report from January of this given year onwards.
All businesses and private individuals which are registered for VAT and who dispatch or receive goods have to report if the dispatches or arrivals exceed the respective yearly threshold.
The data for the Intrastat report must be reported at least once every month:
VAT ID number
Value – excluding VAT and excise duties
Quantity in net mass
Unity (litre, number of items etc.)
Code for the nature of transaction (buying, selling, processing activity)
Mode of transport
Attention: As of 30 March 2019, all EU law will cease to apply to the United Kingdom.
Working in the EU
As an employer, you have a right to hire staff from other EU countries. To do so you must know the relevant EU-laws and apply them correctly. Among others you must consider:
- Equal treatment
- you must give jobseekers from other EU countries the same
treatment as applicants from your own country
- you have to provide other EU nationals with the same working
conditions (salary, paid annual leave etc.) as you offer your own
- jobseekers from an EU country do not need a work permit
- you cannot discriminate jobseekers from other EU countries because
of their nationality, racial or ethnic origin, gender, disability, religion
or belief etc.
- Recognition of qualifications
If the profession for which you seek staff is regulated, the jobseeker from another EU country needs to get his professional qualifications recognised by a competent authority. In certain sectors there are specific EU-rules (lawyers, air traffic controllers, pilots etc.)
- Parental leave
All employees (male and female) are entitled to parental leave on the birth or adoption of a child. Under EU rules, staff can take parental leave at any time until the child is 8 years old. After parental leave time, an employee is entitled to return to the same (or equivalent) job. If returning employees request a change in their working hours or patterns, you are obliged to give this request due consideration.
- Health insurance
In the EU, the country responsible for the social security and health insurance of your staff depends on their economic status and place of residence – not their nationality. In each EU country there is a National Contact Point that can help. If your employee lives in another EU country, he is entitled to medical treatment on both sides of the border. In most EU countries the dependants enjoy the same rights as the employee himself.
EU - VAT: Fraud Combat
On June 22, 2018 the EU Member States reached a political agreement: New tools have been adopted to close loopholes in the EU’s Value Added Tax system.
These new measures aim to build trust between Member States and thus make it possible to exchange more relevant information and to cooperate more closely in the fight against criminal organizations.
VAT fraud is tackled more quickly and more efficiently, the EU enforcement bodies receive systematically information and intelligence on organized gangs involved in the most serious cases of VAT fraud.
The new measures ensure an improved investigative coordination between tax administrations and law enforcement authorities at national and EU level. Thus criminal activities may be tracked and tackled more quickly and more efficiently.
With these new tools to combat fraud, the EU Member States hope to reduce the annual loss of € 50 billion considerably and thus obtain a positive impact on their budgets.
Data Protection and Online Privacy
The General Data Protection Regulation (GDPR) sets out detailed requirements for companies and organisations on collecting, processing, storing and managing personal data.
The GDPR applies to:
European companies and organisations that process personal data of individuals in the EU
Companies and organisations outside the EU that target people living in the EU or observe their behaviour (these businesses have to appoint a representative in the EU)
The GDPR does not apply if:
the data subject is a legal person
the processing is done by a person acting for purposes which are outside his trade, business, or profession
the data subject is dead
Personal data is any information about an identified or identifiable person (data subject), such as their:
name, address, contact details, IP-address
racial or ethnic origin
religious or philosophical beliefs
genetic or biometric data
personal data related to criminal convictions
Processing of personal data
There are two categories of processors:
the data controller decides himself and on his own responsibility about the purpose and the kind of processing (e.g. financial counsellor, lawyer)
the data processor will only process data when instructed to do so by the data controller; he is subject to directives.
Legal basis for the processing of personal data
You may process personal data only if you fulfil one of the following conditions:
you have been given the consent of the individual concerned (e.g. click a box for Newsletter)
you need the data to fulfil a contractual obligation with the individual (e. g. file a tax return)
you need the personal data to satisfy a legal obligation (e.g. transfer social security contributions)
you process personal data to carry out the task in the interest of the public (e. g. health data with epidemics)
you are acting in your company’s legitimate interests (e.g. billing of an accomplished mandate)
Providing transparent information
The individuals have the right to be informed about:
who is processing the data
why the data is processed
what the legal basis is
the categories of personal data concerned
the storage period of the data
the recipients of the data
the data protection rights
Rights of the data subject
right to access (origin of data, purpose of processing, categories of data, recipients of data)
right to correct incorrect or incomplete data
right to erasure / right to be forgotten
right to have the processing restricted
right to data portability
right to complain with the Data Protection Authority
Duties of the data controller
According to the GDPR the data controller has various duties:
Notification of data breaches
If personal data is disclosed, either accidentally or unlawfully, to unauthorised recipients the Data Protection Authority must be notified within 72 hours
Responding to requests
If you receive a request from an individual who wants to exercise his rights, you should respond to his request within a month in writing in clear and plain language
As a proof that your company acts in accordance with the GDPR and fulfils all applicable obligations you must keep detailed records about the data processing containing such information as:
- name and contact details of your business involved in data processing
- legal basis for the processing ( consent, contract etc.)
- reasons for processing personal data (filing a tax return, representation before the court etc.)
- categories of personal data processed (address, bank details, health data etc.)
- recipients of the personal data (financial office, social security authority etc.)
- transfer of personal data to another country (e-mail via Outlook to the USA)
- storage period of the personal data (duration of contract, legal storage period etc.)
- description of security measures used when processing personal data (access control,
encryption, pseudonymisation etc.)
The provisions of the GDPR are binding for all businesses in the EU that are processing personal data. The Data Protection Authority has the right to control the compliance. The data subject has the right to complain.
The non-compliance with the GDPR may result in significant fines of up to EUR 20 million or 4 % of your company’s global turnover.
If an employee converts part of his salary into a company pension scheme in the form of a direct insurance or a pension fund, up to € 6,240 may be paid tax-free in 2018 (until the end of 2017: € 4,848). Since this year, 8 percent (previously 4 percent) of the income threshold can be converted tax-free into Pension Insurance west. Attention: With the Income threshold nothing changes. Here, only 4 percent of the income threshold in the Pension Fund west remains free of contributions.
Benefits of company pension:
As a result, employees save on taxes and social security contributions. You do not have to raise the contributions from your already taxed net income; rather, they are based on the gross salary.
Disadvantages of the company pension:
Due to the lower gross salary, the employee pays less taxes and also less social security contributions to the state. As a result, the demands on statutory pension insurance are also decreasing. Although contributions for occupational pensions in working life do not have to be taxed, they must be taxed, the must be taxed at retirement age. In addition, the full contribution to health and long-term care insurance must be paid later on the occupational pension.
If the employer pays the occupational pension alone, you should definitely join. Nevertheless, on the future pension of the statutory health insurance the full contribution to health and long-term care insurance must be paid. Still, it's worth it because you'll receive a company pension later on, without ever having paid for it.
Turnover Tax Fraud with Trade on the Internet
For turnover obtained via online trade, traders often pay insufficient or no turnover tax at all. For this reason, the legislator has now reformed the VAT Act.
On January 1, 2019 the new regulations of the VAT Act become effective and they will contribute to the fight against VAT fraud with trade on the internet.
A trader sells goods in Germany via an online marketplace on the Internet. The turnover is subject to the German turnover tax.
The online marketplace operator offers his logistics services for a commission payment, but is not involved in the turnover process.
The trader owes the German turnover tax.
If the trader is based in India, China, Italy or … and is not registered in Germany, he may avoid the payment of the VAT and the state loses high revenue.
The operators of the online marketplaces are held liable for the tax amounts that result from the trade on their platforms but are not registered and paid duly. In order to avoid this liability, the operator must inform himself about the registration of the trader with the financial authorities and he must take necessary steps if there is no registration (i.e. block the place of the trader on the online-portal).
According to § 22 f UStG-E the operator has the duty to file the registration of the trader in accordance with the certificate of the tax office and show the documentation to the tax authorities upon request.
The tax office informs the operator if a trader does not pay the turnover tax due.
The operator is liable for all turnover taxes arising from sales on the online marketplace after the date of information. The legislator grants the operator a grace period: The liability of the market place operator for third country traders will be applicable starting March 1, 2019 and for national or EU-traders starting September 1, 2019.
The operator can avoid the liability if he blocks the trader on his portal.
Tax declaration: Yes, or No?
If one of the following points applies to you, you are legally obliged to file a tax declaration.
During the previous year you earned not only a salary but also wage-replacement benefits
(i.e. short-time allowance, unemployment allowance or parental allowance) that are higher than 410,00 EUR
For the tax deduction an additional tax exempt amount for higher professional expenses has been considered
There is a second work relationship with tax code VI
Spouses or partners taxed with tax classes III/V or IV + factor
If you don’t earn a salary but have an income from pensions or from rent and lease or if you are an independent professional, you must only verify if the total amount of your income does not exceed the tax exempt subsistence level. For the years 2017 and 2018 this level amounts to 8,820.00 EUR respectively 9,000.00 EUR for a single adult and 14,856.00 EUR for a couple. If this amount is not exceeded, a tax declaration is not necessary.
The delay for the filing of a self-filled in tax declaration is end of May of the following year (from the assessment year 2018 it is end of July 2019). If a tax consultant files your tax declaration, the delay is December 31 of the following year (from the assessment year 2018 it is end of February 2020, i.e. in conformity with $ 149, article 3 of the German tax code: the last day of the month of February of the second following year).
Numerous tax payers give away money year after year, but a voluntary tax declaration can be beneficial. And it is not true that the voluntary filing of a tax declaration leads to a permanent mandatory filing. The delay of a voluntary tax declaration is the end of the fourth year after the assessment year.
Marginal value for invoices for small amounts
The uprating of the limit for small-amounts invoices from 150,00 Euro to 250,00 Euro was set into force retoactively form January 1, 2017
The uprating of the limit for small-amounts invoices from 150,00 Euro to 250,00 Euro was set into force retoactively form January 1, 2017
The European Union and Taxation
The kinds of taxes each country of the European Union raises and the setting of tax rates depend on the national legislation of each Member State. The national government decides, not the EU.
The role of the EU is to oversee national tax rules, to ensure they are consistent with the EU policies, such as:
- Promoting economic growth and job creation
- Ensuring the free flow of goods, services and capital around the EU (in the single market)
- Making sure there is no unfair advantage
- Ensuring that there is no discrimination in taxation
EU decisions on tax matters require unanimous agreement by all member governments. This ensures that the interests of every single EU country are taken into account.
VAT and excise duties
For some taxes, such as VAT or excise duties (taxes on petrol, tobacco and alcohol), all 28 national governments have agreed to broadly align their rules and minimum rates, to avoid distorting competition across borders within the EU;
Corporate and income tax
For these taxes, the EU’s role is to ensure that principles such as non-discrimination and free movement in the single market are followed.
The EU has no say in how countries spend their tax revenues. However, due to globalisation, countries that go into too much debt may jeopardise growth in other EU countries and undermine the stability of the Eurozone.
To minimise this risk, EU countries try to coordinate their economic policies closely and to make tax policies fairer, more efficient and more growth-friendly (see for example: treaties to eliminate double taxation),
Standardised taxation of goods and services
EU countries have agreed to align their rules for taxing goods and services, in order to make it easier for goods and services to be traded across borders within the EU and avoid competitive distortions.
Fair taxation across borders
The tax laws of one country should not allow people to escape taxation in another country.
The EU elaborates:
- Rules on information exchange between EU countries and their tax administrations
- A quick reaction mechanism to combat VAT fraud
- A common system for taxing financial transaction
The new data protection: Processing in the employment context
On May 25, 2018 the new § 26 Bundesdatenschutzgesetz (BDSG) (Federal Data Protection Law), which regulates the processing of data for the purposes of an employment relationship, comes into force.
The new data protection for employees must be put into practice by the employers as well as by superiors, representatives or providers.
Personal data of employees may be processed for the purposes of an employment relationship if this is necessary for the foundation, the performance or termination of an employment relationship or for the execution of rights and obligations from works agreements (i.e. planning and organization of work).
The employee may consent to the processing of the personal data. It is of utmost importance that the consent is given freely and in written form.
The controller must take appropriate steps to ensure that the principles relating to the processing of personal data laid down in Article 5, Directive (EU) 2016/679 are complied with (the processing in conformity with lawfulness, fairness and transparency).
The employee must be informed about the purpose of the data processing as well as about his/her right to withdraw the consent according to Article 7, no. 3 of the Directive (EU) 2016/679.
EU – Company Law: Harmonised rules on cross-border moving, merging and dividing of companies
In the EU Single Market, companies have the freedom to move and grow. Currently, national rules differ greatly between Member States and generate excessive administrative hurdles and high costs, which prevent companies from looking for business opportunities abroad.
The European Commission has proposed new company law rules that will make it easier for companies to merge, divide or move within the single market.
The clear procedures enable businesses to move or reorganise within the single market without unnecessary legal complexities and at a lower cost, in particular by making digital solutions available for the registration, the filing of documents or information throughout a company’s lifecycle.
The new rules will enable companies to register online, to set up new branches or to file documents to the business register online. Going digital will make the process of setting up a business more efficient and cost effective.
Important: The new rules will also ensure that employees’ rights are well protected. At the same time, they include effective safeguards against abusive arrangements to circumvent tax rules or jeopardise creditors’ interests; the national authorities will be able to rely on each other’s information and more information about companies will be available free of charge in the business registers.
The aim of the new rules is to make it easier and less expensive for companies to merge, divide or move within the single market and thus stimulate the growth potential of European companies.