EUROsociAL – Workshop Brasilia The European VAT System And The German Application Andrea Gebauer German Federal Ministry of Finance

EUROsociAL – Workshop Brasilia European Aspects

EUROsociAL – Workshop Brasilia The European VAT Harmonization First and Second Directive on turnover taxes (April 1967): –Europe-wide introduction of VAT with input tax deduction until 1th of January 1972 Sixth Directive on the Harmonization of the Law of the Member States relating to turnover taxes (incl. several directives of amendment) (1977) –General conditions of the European VAT system

EUROsociAL – Workshop Brasilia The Sixth Directive I Regulations and definitions: –Scope –Territoriality –Taxable person –Taxable goods and services –Place of taxable transaction –Chargeable event and chargeability of tax –Basis of assessment –Tax rates, e.g. Minimum normal rate 15% (since January 2001) 1-2 reduced rates –minimum 5% –only special items (Annex H) One tax rate for import and domestic transactions

EUROsociAL – Workshop Brasilia VAT Standard Rates in the European Union 2006

EUROsociAL – Workshop Brasilia VAT Reduced Rates in the European Union 2006

EUROsociAL – Workshop Brasilia The Sixth Directive II Regulations and definitions: –… –Tax rates –Tax exemptions –Deduction –Liability for payment of tax –Obligations for taxable persons –Special regulations, e.g. Small traders regulations Average rates for agriculture and forestry enterprises –Simplifications –Transitional arrangements

EUROsociAL – Workshop Brasilia The Sixth Directive III Regulations and definitions: –… –Simplifications –Transitional arrangements –So-called transitional regime for turnover taxation in the European Community (1993) Abolition of border controls for tax reasons within the EC Introduction of a tax-free intra-Community supply of goods Origin regime for tourist traffic European decision mechanism

EUROsociAL – Workshop Brasilia Turnover Taxation in Germany - VAT System -

EUROsociAL – Workshop Brasilia German VAT System VAT introduction: VAT: common tax Legislation: Federation German legal base: –Turnover Tax Law (UStG) –Turnover Tax Implementing Order (UStDV) Administration: Länder

EUROsociAL – Workshop Brasilia German VAT System Legislation: Federation German legal base Administration: Länder Design of the German VAT system: –2 tax rates: Standard rate Reduced rate (in particular to food, printed matter and other cultural supply of goods or services for public benefit, certain health services and local public transport)

EUROsociAL – Workshop Brasilia Development of the German VAT Standard Rate and the Reduced Rate

EUROsociAL – Workshop Brasilia German VAT System Legislation: Federation German legal base: Administration: Länder Design of the German VAT system: –2 tax rates: Standard rate Reduced rate (in particular to food, printed matter and other cultural supply of goods or services for public benefit, certain health services and local public transport) –Exempt transactions, e.g. Exports and intra-Community supply of goods Financial transactions Renting and leasing Treatments

EUROsociAL – Workshop Brasilia Design of The German VAT System –2 tax rates –Exempt transactions –Tax payers: Traders who carry out taxable transactions and make taxable acquisitions Persons liable for customs duties (on imports)

EUROsociAL – Workshop Brasilia Design of The German VAT System –2 tax rates –Tax payers –Tax payable on: Supplies of goods and services made for consideration by a trader in Germany in the course of his business Intra-Community acquisition made for consideration in Germany Importation of goods into Germany

EUROsociAL – Workshop Brasilia Design of The German VAT System –2 tax rates –Tax payers –Tax payable on: Supplies of goods and services made for consideration by a trader in Germany in the course of his business Intra-Community acquisition made for consideration in Germany Importation of goods into Germany –Deduction of input tax

EUROsociAL – Workshop Brasilia Input Tax Deduction Requirements Requirements in principle: –A trader received –from another trader –a taxable supply of goods and services –for entrepreneurial purposes and –is endued with an invoice (§§ 14, 14a UStG) and –the tax payment is obligatory.

EUROsociAL – Workshop Brasilia The German VAT System Company ACompany BFinal consumptionCompany C Sale Purchase Sale Purchase Sale Buying Tax =1.600 Tax =1.600 Tax =1.600 Tax charged at every stage of production and sale Fractioned payment of VAT by companies in the company-chain VAT and input tax are autonomous claims which arise in principle from service provision (so called Soll-Prinzip)

EUROsociAL – Workshop Brasilia Design of The German VAT System –2 tax rates –Tax payers –Tax payable on: Supplies of goods and services made for consideration by a trader in Germany in the course of his business Intra-Community acquisition made for consideration in Germany Importation of goods into Germany –Deduction of input tax –VAT declaration and Collection, Special Announcement Duties

EUROsociAL – Workshop Brasilia VAT Declaration And Collection, Special Announcement Duties Declaration of VAT –Advance announcement (Umsatzsteuervoranmeldung) VAT previous year > € 6.136: monthly announcement € 512 < VAT previous year < €: quarterly announcement Startups: for 2 years monthly announcement –Annual tax declaration VAT previous year < € 512: only annual tax declaration Others: annual tax declaration in addition to advance announcements Charge of VAT –Tax returns and advance payments on a monthly or quarterly basis –Annual final settlement Summary Statement quarterly (yearly), e.g. –Intra-Community supply of goods –Triangulation

EUROsociAL – Workshop Brasilia Design of The German VAT System –… –Deduction of input tax –VAT declaration and Collection, Special Announcement Duties –Special Features

EUROsociAL – Workshop Brasilia Special Features Small traders regulations Average rates for agriculture and forestry enterprises Liability Tax audit –„Umsatzsteuernachschau“ –Umsatzsteuersonderprüfung, Betriebsprüfung

EUROsociAL – Workshop Brasilia Turnover Taxation in Germany - Fiscal Aspects -

EUROsociAL – Workshop Brasilia Development of Direct and Indirect Taxes as Share in German Tax Revenue

EUROsociAL – Workshop Brasilia Development of Excise Duties and VAT as Share in Revenue of Excise Taxes

EUROsociAL – Workshop Brasilia Development and Division of German Turnover Taxes VAT introduction

EUROsociAL – Workshop Brasilia Division of German Tax Revenue 2005

EUROsociAL – Workshop Brasilia The End