Temporary cut in VAT rates and extension of payment due dates for import VAT

On 3 June 2020 the leaders of the black-red governing coalition have agreed on a so-called economic and crisis management package in response to the consequences of the Corona crisis. This 31-point package provides a cut in VAT rates and an extension of the deadlinefor paying import VAT to the 26th of the following month.

Starting on 1 July 2020, the regular VAT rate shall be reduced from (currently) 19% to 16% and the reduced VAT rate from (currently) 7% to 5%. The measure shall be limited in application until December 31, 2020.

At the present time, there is still no legislative proposal and thus further details are missing.

In order to be able to make optimal use of the economic opportunities that result, in particular, from lowering the tax rate, companies should identify and implement the necessary adjustments considering the very short implementation period. In the course of changes in VAT rates, there are regular questions about invoicing, the adjustment of ERP systems (new tax codes), but also with regard to the purchase of services from other companies (keyword input tax deduction). Additional complexity arises from the fact that the reduction in VAT rates should only apply for a limited time.