DSLV criticizes additional effort for logistics service providers regarding VAT

The DSLV Federal Association of Freight Forwarding and Logistics questions the six-month reduction of value-added tax in Germany. The additional effort and the resulting costs from the two adjustments jeopardize the benefit for end consumers.

(Berlin) With a six-month temporary reduction of value-added tax rates as part of the government’s economic stimulus and crisis management package, a strengthening of domestic demand, especially by end consumers, is expected. However, the hoped-for economic impulses may be dampened by additional costs to businesses arising from the two changes in tax rates within a few months, fears the DSLV Federal Association of Freight Forwarding and Logistics. The tax reduction, which is already scheduled to take effect on July 1, 2020, requires extensive internal, technical, and administrative preparatory work for the temporary cut-off date adjustment, for invoicing, and for other internal processes without sufficient transition periods in companies. International freight forwarding companies and logistics firms must additionally synchronize the VAT reduction with a corresponding adjustment of import VAT rates in their internal customs IT systems. All changes must be reversed with the same effort by January 1, 2021.

Problems arise from incorrect invoicing

“In the freight forwarding and logistics sector, determining the time of service for other services is extremely complex,” explains Frank Huster, DSLV Managing Director. In the case of displaying the currently applicable VAT rate in the invoice due to an incorrect time of service (e.g., 19 percent instead of 16 percent), the amount displayed too high would be legally owed according to § 14c Abs. 1 UStG, but could then only be deducted by the recipient of the service at the rate of 16%. “If the wrong tax rate is indicated in an invoice, the deduction of input tax for the over-represented tax may be denied,” warns Huster. According to the DSLV, it is also unclear how to handle already paid invoices, annual or collective invoices, partial and ongoing services.

Simplifications demanded

Unlike for end consumer consumption (B2C), the amount of VAT in B2B transactions is irrelevant, as suppliers and customers are entitled to deduct input tax. Therefore, stimulating price impulses will not arise in B2B business. In principle, the DSLV welcomes tax reduction programs from the federal government for economic stimulation, especially if they are set for longer than just six months. The effort and return of the measures must be brought into relation to each other, demands the DSLV. Huster: “Companies urgently need transition periods and simplification rules. In particular, the introduction of a non-objection rule, under which the previous tax rates may continue to be applied in B2B transactions for the entire period of the VAT reduction, is necessary.” Therefore, the DSLV calls for timely business-friendly implementation interpretations from the Federal Ministry of Finance.

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