Germany: Postponed: warranty commitments granted for remuneration as insurance transaction

As reported in #3/2021, in two letters dated 11 May 2021 and 18 June 2021 the German tax authorities have adopted the latest decision of the Federal Fiscal Court regarding warranty commitments granted for remuneration originating from practices in the motor vehicle trade. The new principles will apply across all sectors and thus also beyond the motor vehicle trade, with far-reaching consequences for VAT and insurance tax. According to the letter dated 18 October 2021, the new rules will only be mandatory for all warranty commitments issued after 31 December 2022.

The postponement of the new rules gives time for the discussion and determination of the actual scope of application and the factual requirements of these new principles, e.g. establishment of the consideration. Nevertheless, it is conceivable that numerous affected industries and companies will be facing insurance tax compliance requirements for the first time as well as changes in the general conditions under VAT law.

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