Temporary reduction in value added tax
On June 3, 2020, the German government passed a coronavirus economic stimulus package. Among other things, it includes a reduction in sales tax. This tax is levied on goods and services. Every private consumer pays this tax when consuming goods in Germany.
How long will the reduction in value added tax apply?
From July 1, 2020, VAT rates will be reduced for six months from 19% to 16% (standard rate) and from 7% to 5% (reduced rate). From January 1, 2021, the 19% and 7% VAT rates will apply again. For the catering industry, a reduction in the VAT rate for food in restaurants and pubs from 19% to 7% has been decided. This regulation for the industry is temporary and will apply between July 1, 2020, and June 30, 2021. Alcoholic and non-alcoholic beverages are excluded.
What needs to be considered?
Many companies now face the challenge of converting their systems and would be well advised to adapt their ERP (enterprise resource planning) and POS systems to the changed tax rates as soon as possible. Contact your service providers in good time if you are unable to make the changes yourself – they are likely to be very busy at the moment.
There have been tax rate changes in the past, and the following has always applied: The date of performance is decisive for the VAT rate. Special features relating to advance payments and services such as partial services, construction services, rentals as ongoing services, vouchers, exchanges, and much more must also be taken into account.
What should you do now?
In any case, talk to your tax office or tax advisor about what you need to pay attention to individually! For communication with your clients via newsletters, social and business media, and shop systems, please contact us at pole-position@drive.eu.
