23. September 2020

Reduction of the rates of value added tax: This is the right way for you as an entrepreneur to deal with it


The planned reduction of the value added tax rates keeps us busy. What we know so far, we have shared with you here. Thomas Müller has also already given you an initial assessment of the practical challenges that the topic will bring with it. In the following, we have collected some pragmatic answers and tips on the relevant questions of accounting practice.

Adaptation of cash register systems, computer systems and forms to the new VAT rates. With these tips, you can save yourself trouble.

There is just under 3.5 weeks left to make the necessary adjustments. Act now.

Adaptation of cash register systems to reduced VAT rates

You need to reprogram your electronic cash registers. The new tax rates must be programmed in by 1 July 2020. After close of business on Tuesday, June 30, 2020, the new tax rates must be stored by July 1, 2020. Experience shows that you should prepare this programming, especially if you need external technicians to do this. The dates will be rare.

That is one side of the coin. However, there’s another side: From a tax perspective, you must document the reprogramming of the cash register. This is necessary. You enclose the protocols with your cash-register documentation. If you do not do this, you will not meet the requirements for a cash register review by the tax office. Therefore our recommendation: Have the reprogramming carried out and documented by experts.

Receipts, vouchers and invoices

You must also display the new sales tax rates on your receipts and invoices. If these have to be adapted in cash-register systems, billing systems or merchandise management systems, you should take the necessary precautions timely. Here again, you may have to call on the services of qualified personnel. Secure free appointments quickly.

In the analogue world, you should take a close look at your forms. If they still contain a wording such as: “All-inclusive 7 percent or 19 percent VAT”, the VAT law stipulates that you must then pay the wrong higher rate of tax. This also applies to cases in which the higher VAT amount is spent. The entrepreneur owes an overstated VAT amount.

Catalogues, flyers and advertisements

Many entrepreneurs have also included information on VAT rates on their printed publications, for example in catalogues, flyers, advertisements or brochures. We recommend that you revise all publications. Brochures can be updated with stickers or inserts.

Three changes within one year in the catering industry

In the catering industry, the tax rates in the internal systems and processes have to be changed three times within one year. This is the consequence of the corona-related adjustment of the tax rate on meals. We had reported that from 1 July 2020 until 30 June 2021 the reduced tax rate will also apply to meals in the house. However, this now leads to the fact that these tax rates are to be applied to in-house meals:

  • by 30 June 2020: 19 percent
  • 1 July 2020 to 31 December 2020: 5 percent
  • 1 January 2021 to 30 June 2021: 7 percent
  • by 1 July 2021: 19 percent

From an organizational point of view, restaurateurs face the biggest challenges, as they have to adapt their systems and processes, all forms and offers several times. Also because of the documentation obligation, we advise all restaurateurs to address this issue as soon as possible.

Our assessment

Please do not take the necessary measures lightly and organize the adjustments timely.

However, there is no obligation to pass on the VAT reduction to your customers. You decide entrepreneurially whether you reduce your prices or whether you claim an additional margin due to the lower tax rates. The decision is up to you.

As of today, the announced measures have not yet been incorporated into a draft law. However, we assume that this will also happen on July 1, 2020, following the media-effective announcement. Initial voices in politics are already calling for the time limit of 31 December 2020 to be reconsidered.

We will keep you up to date and help you if you have questions or need of support.

Thomas Müller

Associate Partner, Steuerberater, Fachberater für Unternehmensnachfolge (DStV e.V.)


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