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ARTICLE · 13 JULY 2020

Reduction Of Value Added Tax Rates – Practical Impacts

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In effect from 1 July 2020 until the end of 2020, the German legislator has decided to reduce the value added tax ("VAT") rate from 19% to 16% and from 7% to 5%; respectively.

GermanyTax
Susan Günther
Susan Günther
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In effect from 1 July 2020 until the end of 2020, the German legislator has decided to reduce the value added tax ("VAT") rate from 19% to 16% and from 7% to 5%; respectively.

Such reduction came at very short notice and is likely to cause some difficulties of implementation as well as raise questions of doubt. In a circular issued by the Federal Ministry of Finance, dated 30 June 2020 (GZ III C 2 - S 7030/20/10009), the fiscal authorities addressed various related topics. The following issues will be relevant for the real estate sector:

Long-term Services

In case of services that extend over a longer period of time (e.g., construction services or lease agreements), the service is generally deemed to have been rendered at the end of the performance period and the tax rate relevant at the end of this period shall be applied accordingly Thus, if a construction work was started in April 2020 and completed in August 2020, the tax rate applicable will be that in

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