CURRENT DEVELOPMENTS

Germany: new mandatory information in reverse charge services from January 1st, 2014

In the case of the reverse charge procedure (section 13(b) of Germany's Value-added Tax (VAT) Act (UStG)), it is the recipient of the services who requires to pay value-added tax (VAT) and not the performing business person. Hitherto, when a business person provided a service which came within the reverse charge procedure, he was required to “refer” to the tax liability of the recipient of the services in his invoice. Various wordings were possible for the said reference.
 
From January 1st, 2014, it is mandatory that invoices contain the following information: “tax liability of the recipient of the services”. Notwithstanding this, the financial authorities also recognise the afore-mentioned information in other official languages provided that the wording used is identical to that used in Article 226. Nr. 11a of the Council Directive on the common system of value-added tax in the respective language versions (e.g reverse charge). In the case where this information is not included or different wording is used, it will have no effect for the deduction of input tax due to it not constituting a proper invoice in the case of a reverse charge procedure.

In the case of cross-border reverse charge services provided, the question arises as to whether the invoice is to be issued in accordance with domestic or non-domestic law. In determining which applies, the Act implementing the Mutual Assistance Directive makes the following differentiation:

  • Foreign business persons (EU business persons) are to invoice the reverse charge service domestically

    If reverse charge services are provided domestically (in Germany) by a foreign EU business person with neither its registered office nor its company management based domestically, the provisions on invoicing of the foreign EU member state in which the business person has his registered office, company management or permanent establishment from which the transactions were performed, apply (section 14(7) of Germany's Value-added Tax (VAT) Act (UStG)). If there is no “registered office”, the permanent or habitual residence shall be the deciding factor.

    In the case where a self-billing invoice is used, the provisions outlined above do not apply and the German recipient of the services is required to accordingly comply with the German guidelines in his self-billing invoice (section 14(4) of Germany's Value-Added Tax Act (UStG)).

  • Domestic business persons are to invoice the reverse charge service in the other EU country

    If a domestic business person deducts a reverse charge service which was provided in another EU country, domestic law shall apply (section 14(a), paragraph 1 of the Value-added Tax (VAT) Act (UStG)). Notwithstanding this, this does not apply if a permanent establishment participates in the said transaction in the relevant EU country or where it has been agreed that the invoicing will take the form of a self-billing invoice.  In addition, the invoice is further required to contain the VAT ID number of both the business performing and the recipient of the service. The invoice may be produced in the German or, if necessary, English language.

 

 

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