The Bundesrat has accepted the Tax Amendment Bill 2003, the least controversial of the tax bills presently in the legislative pipeline. Its entry into force for 2004 is now certain.

The Bundesrat gave its all important assent to the Tax Amendment Bill at its sitting on November 28. This bill is the least controversial of the various tax bills presently in the legislative process, probably because most of its content is technical rather than policy. Its provisions as follows will generally take effect on January 1, 2004:

VAT

  • The present restriction on the input tax deduction on cars used for both business and private purposes to 50% of the tax actually paid will be dropped. Cars used for at least 10% on business will thus rank for full input tax deduction although the private use will be fully taxed as a chargeable output.
  • The statute will follow case law in allowing a commissionaire to broke services as well as goods. As with goods, the supply to the commissionaire for the benefit of the customer will be treated as a coincidental purchase and sale by the commissionaire.
  • Traders in named commodities not generally sold through the retail trade or to final consumers, such as wheat, crude oil, iron and steel, will henceforth be able to hold their stocks in VAT bonded warehouses. Movements into and between warehouses will be free of VAT as will the warehousing and any processing charges.
  • The minimum invoice details have been brought into line with European law. Invoices must be filed in Germany, although digital archives may be kept in another EU country if online access and download can be guaranteed. Henceforth an invoice must show (new items underlined)
    1. The full names and addresses of supplier and customer
    2. The tax number of the supplier or his VAT ID No.
    3. The invoice date
    4. The invoice serial number
    5. The quantity and type of goods delivered or the scope and description of services rendered
    6. The delivery date or date of payment if known at the time and if not identical with the invoice date
    7. The price split between tax rates and individual exemptions as well as any prior agreed price reduction not already reflected in the prices charged
    8. The tax rate and amount, or the reason for any exemption (zero-rating)
  • The rules for documenting an input tax deduction have been tightened. A finance ministry decree is pending. The effective date of the new standards is likely to be June 30, 2004
  • There will no longer be an input tax deduction on hotel expenses, subsistence allowances or staff travelling costs by private car
  • The purchaser or pledge-holder of a debt acquired or pledged will be jointly liable to the tax authorities for any VAT included in the amount
  • VAT monthly or quarterly returns are to be filed electronically from 2005. The tax office may grant individual exceptions to those without the necessary equipment
  • There will be a rebuttable presumption that a purchaser knew or should have known of a "merry-go-round" VAT fraud if he sells goods below their purchase price or market value. If not rebutted, this presumption would make him liable for any loss of VAT.


Employee wage withholding tax

  • Preparatory measures for a move towards complete electronification of the employee wage withholding tax process. Ultimately it is hoped that employee, employer and tax office will all communicate by e-mail
  • The domestic host of staff assigned from foreign related parties will be required to account for the German wages withholding tax if the salary costs are ultimately borne in Germany


Investment income

  • Banks and stockbrokers will be required to furnish their customers with annual statements of income, investments held and capital gains realised. The customers will be able to use these statements in their tax returns as credit vouchers for withholding tax deducted at source


Other changes

  • The statute now follows a Supreme Tax Court case holding renovation costs of more than 15% of the purchase price of a building within three years of its purchase to be capitalisable as ancillary costs of acquisition.
  • Double-household relief will no longer be limited to the first two years only - follows a Supreme Tax Court case
  • The tax-free uplifts for Sunday, bank holiday and night work may not be based on an hourly wage of any more than € 50
  • The costs incurred for foster children must be itemised if child allowances are claimed
  • Redundancy payments to staff who have since moved abroad are to be taxed as the income of non-residents.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.