After two days of negotiations, the grand coalition of CDU and SPD agreed this evening on an economic stimulus package which is to provide new impulses for the economy in the near future.

The focus here is on stimulating consumption.

The core element is the temporary reduction of the VAT rate to 16 or 5 percent.

Reduction of the tax rate Value Added Tax to 16 and 5 percent

From 1 July 2020, a tax rate of 16 and 5 percent will apply to all taxable and taxable supplies in Germany.

This level is to apply temporarily until 31 December 2020.

What does this mean for online trade?

Effects on online trade

There are four points that online merchants have to consider in the short term.

  • Invoicing tools and ERP systems must be able to show a tax rate of 16 or 5 on the invoice for all deliveries from 1 July onwards. The time of delivery should not be confused with the date of issue of an invoice, as is still often the case in online commerce - see here. It can be assumed that the tax offices will subsequently pay attention to a clean delimitation of the temporary tax reduction.
  • If your invoicing tool or ERP still shows 19 or 7 percent Value Added Tax from July 1, you will owe the higher VAT amount until you have verifiably corrected the invoices - see here.
  • Refunds for cancelled deliveries (returns) will not necessarily be subject to the reduced tax rate from 1 July 2020. The sales tax valuation of the original deliveries is decisive.
  • A waiver of delivery thresholds for deliveries to Germany - e.g. from Amazon-warehouses in Poland and the Czech Republic - is now even more advantageous due to the temporary even greater tax rate differential, as the tax rates in Poland and the Czech Republic are still 23 and 21 percent respectively - see here.

Effects for Taxdoo users?

With Taxdoo you are on the safe side. If you also use our DATEV interface, your financial accounting will continue to run safely and cleanly, fully automated - see here.

Taxdoo is the Compliance platform for the digital economy

... and, in addition to handling the current online retailers in Europe, forms the Value Added Tax compliance with numerous other compliance services via a unique platform.

If you would like to know more about how you can achieve Value Added Taxcompliance, financial accounting and much more efficient and secure via one platform then use this link to book your individual and free initial consultation with the compliance experts from Taxdoo!

You are also welcome to register for our regular demo webinar in which we will introduce Taxdoo and our compliance services and answer your questions personally.

P.S.: Taxdoo has been an official partner of DATEV in online trading since the beginning of 2020.