8th June 2020
As part of an extensive legal package to support its economy in the wake of the COVID-19 pandemic, the governing parties in Germany have announced that the Government will reduce German VAT rates as of 1 July 2020. The reduction is scheduled to be applicable until 31 December 2020.
The standard rate in this period will be reduced from 19% to 16%, the special rate applicable e.g. on various food and medical products will go down from 7% to 5%.
For foreign companies conducting business in Germany, the reduction is critical with regard to the actual fulfillment date of a project or an order in Germany, which will define the applicable VAT rate. Using the wrong rate may not only lead to a liability for the performing company, it may also lead to a cash impact; as the receiving party could deny payment of an invoice that shows the wrong tax amount, asking for a correction before paying.
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For more information on this developing topic, please contact: Andreas Klier at Pape & Co. GmbH, Munich, Germany email@example.com or Thomas Althoff at RLT Ruhrmann Tieben & Partner, Essen, Germany firstname.lastname@example.org
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