Temporary VAT reduction

From 1 July 2020 until 31 December 2020, a reduced VAT rate of 16% or 5% applies in Germany. This also affects the services of Taxdoo.

For subscriptions, the last day of the service period is decisive. If, for example, the service period ends on 15 July 2020, the tax rate of 16% applies. However, if a subscription is entered into in December 2020, whose service period ends on 5 January 2021, the tax rate of 19% applies.

In the case of services rendered after 1 July 2020 and prior to 1 August 2020, the Federal Ministry of Finance (BMF) has stipulated a transitional rule. Invoices issued for these services, which contain an overstated tax rate, do not need to be corrected without this affecting the deductibility of input tax. Approval of the tax authority is not required in this connection.

The BMF letter can be accessed via this link; the rule is found on page 22 (point 3.12).