That the upcoming changeover of VAT for companies will not be as easy to deal with as it was announced should have quickly become clear to every entrepreneur. As an IT company 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 contact with a tax advisor on this subject seems urgently required!
Timing counts
The point in time at which VAT must be paid depends on the distinction between a supply and another service. In the case of a supply, the recipient must have acquired the power of disposal over the object.
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. Here, one must differentiate more precisely.
Services Subscriptions Partial and permanent
If you have sold your customers services and/or subscriptions whose duration extends beyond 01.07.2020, you must invoice them with different VAT depending on the period. Whether these are Software as A Service (SAAS) or Managed Services is irrelevant. For the determination of the VAT, the time of the performance of the service is decisive.
Depending on this, however, there may be continuous services which are only considered to have been rendered in total when the agreed period of performance ends. In this case, the VAT rate applies. -rate applies at the end of the performance.
Positively formulated, there could be room for manoeuvre here.
In case of doubt, it should be possible to deduce from orders, agreements and contracts whether the services are partial or permanent.
If you want to claim for partial services, these must be economically separable. On the other hand, there should be an agreement with your client on the performance of the service as a partial service.
Publish VAT
Caution is also advised if you operate a web shop or have published prices or price lists online. According to § 1 para. 1 PAngV (Price Indication Ordinance), you are obliged to indicate the price including the value added tax to be paid. The warning industry is already rubbing its hands together and is happy to send out warnings based on the Unfair Competition Act (UWG).
Check if the VAT is in the contracts
Have you concluded contracts with your customers that can be interpreted as invoices or invoice components? If these fall within the period of the VAT changeover, they may need to be adjusted accordingly. It is better to always refer to only the applicable VAT rather than a figure in such texts.
VAT with down payment
Down payments that you have made also require special attention. If you have received an input tax refund of 19 % of the invoice value for this and the invoiced service does not take place until after 01.07.2020, you must repay the excess input tax refunded. To do this, you must carry out an input tax adjustment in accordance with § 17 UStG.
VAT with deposit received
Down payment received: If you have paid 19 per cent VAT to the tax office from a down payment received and the service is not provided until 1 July 2020, you must correct the VAT from the down 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 temporarily reduce VAT.
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The role of the acceptance of services
If you have concluded a contract for work and services with customers and/or agreed partial works therein, the acceptance is decisive for determining the tax rate. This means: If the acceptance takes place before 01.07.2020, 19 % VAT is applied, if the acceptance or partial acceptance takes place after this date, 16 % is to be applied.
Consequences of incorrectly charged VAT
If you have mistakenly charged 19 % or 7 % VAT on an invoice within the next six months, you also owe the tax authorities the overcharged tax. Your customer, on the other hand, can only claim 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.
With invoices from your suppliers, you should check exactly which 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 turnover tax.
more on the subject:
SAP reacts to the Corona crisis with free access to the trading platform
Time to tidy up – optimize ERP software now (part 1)
Learn with SAP for free
ERP projects despite or because of Corona
Reduction of VAT 2020
