Newsletter EN

VAT Reduction Bill in Germany, Corona-Help

On June 3, 2020, a government coalition decided on various measures to combat the effects of coronavirus. The aim of these measures is to strengthen the economy and economic power of Germany. To strengthen domestic demand in Germany, the VAT rate will be reduced from 19% to 16% and from 7% to 5% from 1/7/2020 to 12/31/2020.

Regardless of whether a VAT reduction, as a temporary measure, will have the desired effect, companies need to act now. It is necessary to adapt systems and processes, change contracts and change accounting. At the same time, remember that changes can be undone after six months.

Reduced tax rates apply only to services that were provided between 07/01/2020 until 12/31/2020. However, the timing of the conclusion of the contract, billing or payment does not matter.

The following areas are particularly affected by tax rate changes and require a short-term adjustment:
-         Long-term services (licenses, leases, leasing)
-         Down payments
-         Membership fee
-         Magazine Subscriptions
-         New tax codes
-         Cash systems
-         New Accounts in bookkeeping
-         Travel expenses
-         Reservation of accommodation
-         Corporate car
-         Learners and annual bonuses

Please note that this is still a draft law.

The federal government will meet shortly to achieve a reduction in VAT.