On 1 October 2020, the Federal Ministry of Finance issued a circular regarding the revised definition of work deliveries due to a ruling of the Federal Fiscal Court which was supposed to be applicable from 1 January 2021. This deadline has now been extended to 30 June 2021 by a new decree of the Federal Ministry of Finance dated 11 March 2021.
According to the ruling of the Federal Fiscal Court, a work delivery is a uniform supply of a product consisting of delivery elements and service elements in combination with the processing of components not belonging to the supplier, e.g. owned, procured or provided by the customer.
Before, the German Tax Authorities considered a work delivery to be determined by the obligation of the supplier to produce the item (movable property) requested by the customer from materials procured or produced by it. Unlike the understanding of the Court, it was not required to process provided objects, i.e. items not belonging to the supplier. Thus, in the past, also a so-called supply with assembly and/or installation could qualify as a work delivery. This shall no longer be the case. Regarding the consequences of this revision please refer to our WTS Global VAT newsletter Q4 2020, especially regarding the potential obligation to register for VAT in Germany.
Non-resident suppliers should take advantage of the prolonged period of grace in order to evaluate whether they might be affected by potential VAT obligations, and prepare the appropriate actions.
The Global VAT Newsletter focuses on changes in compliance duties in various EU and non-EU countries.
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