The fact that the upcoming VAT changeover will not be as easy for companies as it has been announced should have quickly become clear to every entrepreneur. As an IT company ourselves in the broadest sense and with many customers from the IT sector, we naturally deal a lot with this topic
What follows is NOT tax advice, which we cannot and must not give. On the contrary, it is rather an indication that contacting a tax consultant on this topic is urgently required!
The time counts
The point in time at which VAT must be paid depends on the distinction between a delivery and other services. In the case of a delivery, the recipient must have acquired the right to dispose of the item.
In the case of a "moving delivery" (transport by supplier or customer), the start of the delivery counts.
With regard to other services, it is the completion of the service that counts. However, a more precise distinction must be made here.
Services Subscriptions Partial and permanent
If you have sold your customers services and/or subscriptions whose duration extends beyond 1 July 2020, you must invoice them with different VAT rates depending on the service. Whether these are Software as A Service (SAAS) or Managed Services is irrelevant. The time of performance is decisive for the determination of VAT.
Depending on the circumstances, however, there may be continuous services that are only deemed to have been provided when the agreed service period ends. In this case, the VAT. -rate applies at the end of the service.
In positive terms, there could be room for manoeuvre here.
In case of doubt, it should be possible to deduce from orders, agreements and contracts whether partial or continuous services are involved.
If you want to claim partial services, these must firstly be economically reasonable. On the other hand, there should be an agreement with your customer regarding the performance of the service as a partial service.
Publish VAT.
Caution is also advised if you operate an online shop or have published prices or price lists online. According to Section 1 (1) PAngV (Price Indication Ordinance), you are obliged to indicate the price including the VAT to be paid. The warning letter industry is already rubbing its hands and is happy to send warning letters that invoke the Unfair Competition Act (UWG).
Check whether VAT is included in contracts
Have you concluded contracts with your customers that can be interpreted as an invoice or invoice component? If these enter into the VAT changeover period, they may need to be adjusted accordingly. It is better to always refer to the applicable VAT in such texts rather than to a figure.
VAT with down payment
Advance payments that you have made also require special consideration. If you have received a refund of input tax of 19 % of the invoice value and the invoiced service does not take place until after 1 July 2020, you must repay the excess input tax refunded. To do this, you must carry out an input tax adjustment in accordance with Section 17 UStG.
VAT with deposit received
Advance payment received: If you have paid 19 percent VAT to the tax office from an advance payment received and the service is not provided until 1 July 2020, you must correct the VAT from the advance payment. In other words, you will be refunded the excess VAT paid.
Solution for SAP Business One
We are working flat out on a solution that will help SAP Business One users to temporarily reduce VAT.
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The role of the acceptance of services
If you have concluded a contract for work with customers or/and have agreed partial works therein, the acceptance is decisive for determining the tax rate. This means: If acceptance takes place before 1 July 2020, 19 % VAT will be applied; if acceptance or partial acceptance takes place after this date, 16 % will be charged.
Consequences of incorrectly charged VAT
If you have mistakenly included 19 % or 7 % VAT in an invoice within the next six months, you will also owe the tax authorities the overcharged tax. Your customer, on the other hand, can only claim the legally owed VAT of 16 % as input tax.
Your client will rightly demand a correction of the invoice.
Pay attention to VAT when checking incoming invoices
You should check your suppliers' invoices carefully to see what tax rate is shown on them. Can it really be deducted in full as input tax? Because the latter is only granted for the correct VAT.
more on the subject:
SAP reacts to the Corona crisis with free access to the trading platform
Time to tidy up - optimise ERP software now (Part 1)
Learn with SAP for free
ERP projects despite or because of Corona
Reduction of VAT 2020
