What is the current tax rate for services
VAT reduction 2020: This applies to the self-employed
Why is the VAT cut limited in time?
The aim of the reduction is to stimulate consumption and Buying incentives to put. This is only possible because of the time limit, because - so the hope is - larger purchases or z. B. Construction projects are preferred in order to "take away" the tax break. If the reduction were not limited in time, it would exist "Pull-forward effects" Not. The Federal Government expects the economy to have recovered to such an extent by the end of the VAT cut that the positive effects of the economic stimulus package will then continue to swing.
Do the self-employed have to pass the VAT reduction on to their customers?
The legislature cannot force you as a self-employed person to pass on the VAT reduction through lower prices for goods or services to private customers. You can also keep prices up and take advantage of the VAT cut to increase your profit margin.
But during the time window from July 1, 2020 to December 31, 2020, private customers will probably put enormous pressure on entrepreneurs. After all, they want to save on purchases or services. There is therefore a risk that customers will migrate to the competition if you maintain your prices despite lowering VAT, but your competitors pass the savings on to customers.
The situation is not that easy for the self-employed and tradespeople: If you pass the tax relief 1: 1 on to your customers, profit and liquidity only increase if the customers actually buy more. Rake in the VAT reduction yourself and thus increase your margin, but it could be viewed critically by one or the other customer. You should therefore not only think of the bare numbers, but also exercise a certain tact. How is your competition doing? How price sensitive are your customers? And last but not least: is there any price comparability for your product / service?
How do I know which sales tax rate has to be reported?
The following rule of thumb applies to the reduction in VAT: The new VAT rates must be shown in the invoice if sales are made in the time window from July 1, 2020 to December 31, 2020:
- At Delivery of goods is that the point in time when the entrepreneur gives his customers the Power of disposal over the goods procured.
- At Services the turnover is carried out, when the service has been performed.
Example delivery time:
A customer bought a vehicle in February 2020 that will be delivered to him in August 2020. Consequence: Since the sales were carried out in the time window of the sales tax reduction, the sales tax must be shown in the invoice at 16%. If the vehicle were delivered in June (or in January 2021), the sales tax would be 19%.
Definitely pay attention to the to show correct VAT. For example, if you do not change your cash register and 19% VAT is shown on the receipt between July and December 2020, you must pay this 19% as well.
What must be considered in the case of partial services - for example in the construction industry?
In some industries, the execution of orders in several partial services is common. For example at construction companies. It can happen that individual partial services are subject to a different VAT rate - depending on the time at which the service is provided or accepted.
Example of partial services:
If a construction company builds a house for a private customer, partial services can be agreed. For example:
1. Completion of the house (in October 2020)
2. Completion of the outdoor facilities (in April 2021)
In this case, 16% value added tax would have to be shown for the first partial service and 19% for the second. In this case, it really pays to be “on time as the bricklayers”. Because if the first partial service were to be delayed and not completed until 2021, the VAT rate of 19% would also apply!
What applies to rental contracts, maintenance contracts and leasing contracts?
These contracts are classic examples of so-called long-term benefits. Here, the service is not billed in full for an agreed period, but for shorter periods of time. This means that different sales tax can apply for different periods of time.
In the case of rental contracts in particular, no monthly bills are usually written. If this is the case, the rental contract is considered an invoice. It is therefore advisable to adapt the contract. Otherwise, 19% VAT will continue to be shown. In this case, however, there may be a simplification or transitional regulation by the Federal Ministry of Finance.
Current status in the letters from the Ministry of Finance
If in doubt, it is worthwhile to take a look at the website of the Federal Ministry of Finance from time to time. There you can find a draft of a BMF letter on the reduction of VAT or a final BMF letter with all the special features and rules of the game for reducing VAT under the heading "BMF letter".
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