Checklist: Preparation for the change of VAT rates

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9. Juni 2020 (Datum der Veröffentlichung)

On 3 June 2020, the coalition committee of the governing parties in Germany adopted a comprehensive economic stimulus package to combat the economic consequences of the Corona (Covid-19) crisis. This programme is outlined in a key point´s paper with 57 individual measures (stallmeyer economic stimulus package). The core element is the reduction of the value added tax or VAT rates.

The VAT rates are to be reduced from 19 % to 16 % and from 7 % to 5 % respectively. This reduction is to take place for the period from 01.07.2020 to 31.12.2020.

The change in the VAT rate has advantages for some consumer-related companies, but considerable IT, bureaucratic accounting and organisational disadvantages for almost all companies subject to VAT. This is all the more so because the tax rate changes are made at very short notice and there are only just under 4 weeks between the idea of the Federal Government and the implementation of the tax rate changes, and a legal finalisation of these measures will probably not take place until at least one week before the changes take effect. Therefore companies are faced with the task of preparing for this VAT rate change without really being sure whether and how this legal requirement will be implemented. In the run-up to these measures, we recommend that the following points be taken into account (list is updated regularly):

Checklist: Preparation for the change of VAT rates.

It must be ensured that the invoicing program or ERP software is capable of invoicing at the new VAT rates (16% and 5%).

  • The internal financial accounting system must be able to comply with the VAT recording regulations and to keep the sales on corresponding new accounts.
  • The financial accounting software must be able to transfer values from the new VAT accounts to the advance return for VAT.
  • The financial accounting software must be able to reconcile annual sales tax with the new sales tax rates.
  • If necessary, new accounts or codes must be found that allow input tax deduction for incoming invoices of 16% or 5%.
  • In the case of permanent contracts with fixed monthly invoice amounts, the permanent invoice may have to be changed (e.g. commercial rental contracts, fitness studios, leasing contracts, mobile phone contracts).
  • In the case of direct debits, standing orders or other bank procedures, the collection amount may have to be corrected due to the reduction in the gross charge.
  • If passenger cars are provided to employees or entrepreneurs, the taxation of car use changes in the area of non-cash benefits. In this respect, all payroll accounting for affected employees within payroll calculation must be changed from July and the automated posting processes for this non-cash remuneration must be adjusted to the new VAT rates.
  • Due to the short-term nature of the tax rate changes, it can not be ruled out that the government will allow an option between the old and new VAT rates. In this case, the exercise of this option should be discussed with the business partners in order to find a mutually agreeable solution.
  • Adjustments to cash register systems, receipt issue and vending machine systems including staff training.
  • Adjustments and changes in online or internet shops and electronic marketplaces.
  • Dedicated recording of received and made advance payments as a result of the new VAT rates. This means, for example, that down payments are taxable at 16% in the second half of 2020, but the final performance in 2021 may be taxable at 19%.
  • Exact assessment and allocation of goods and services in the transition between the pre-registration periods June and July 2020 and December 2020 and January 2021.

It is important to make the right decisions now and to prepare for the coming changes. This also takes into account the upcoming holiday season. We are at your disposal for consultation.
We recommend following the website of the Ministry of Finance for the further progress of the legislative process. We will inform you about other important changes at this point.

If you need advice, please contact us by email info@stallmeyer.de or „contact form„.


Larsen Lüngen, Gerhard Müller , Ralf Sieben

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