There will be a temporary reduction in the VAT rate to 16% and 5% from 1st July 2020. What should I now consider if trading online?

On the 3rd June 2020, the coalition of CDU and SPD after two days of discussions approved an economic stimulus package for Germany. This is intended to provide renewed impetus to the German economy going forward. Central to this package is the temporary reduction of the sales tax to 16% and 5% respectively.

VAT rate reduced to 16% and 5%

This tax rate of 16% and 5% will be applied to all taxable supplies in Germany from 1st July 2020. This reduction will apply for a limited period until 31st December 2020.

What influence does this have on online trading?

The effect to online trading

In the immediate future there are FOUR central point’s online sellers must deliberate:

• All invoicing tools and ERP systems have to show a tax rate of 16% and 5% respectively, on invoices for any deliveries after 1st July. In doing so, the actual delivery should not be confused with the ‘date of issue’ of an invoice. You should assume that tax offices will subsequently pay attention to a correct allocation of the temporary tax reduction.
• From 1st July, if your invoicing tool or ERP system shows 19% and 7% VAT, you will be obligated to pay the higher VAT amount until you have verifiably modified the invoices.
• Delivery thresholds for deliveries into Germany will be waivered – e.g. from Amazon warehouses in Poland and the Czech Republic. This is now extremely beneficial due to the temporary differences now between German tax rates and those in Poland (23%) and the Czech Republic (21%).
• Potential refunds for annulled deliveries (returns) are not necessarily subject to the reduced tax rate from 1st July 2020, with the original VAT valuation on those deliveries conclusive.

How does this effect amavat^® clients

Of course, amavat^® will always look after our clients’ interests. If you already use data CSV or you import via API, you are in safe hands. As this means your financial accounting will continue to run automatically, safely and compliant.

eCommerce compliance is what we do

amavat^® provides many online retailers throughout Europe with numerous compliance services, if you would like to know more about how we are one of the leading VAT compliance companies in Europe, then please do not hesitate to contact our experts.

Your amavat^® Team

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