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The European VAT System And The German Application

The European VAT System And The German Application. Andrea Gebauer German Federal Ministry of Finance. European Aspects. The European VAT Harmonization. First and Second Directive on turnover taxes ( April 1967): Europe-wide introduction of VAT with input tax deduction

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The European VAT System And The German Application

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  1. The European VAT System AndThe German Application Andrea Gebauer German Federal Ministry of Finance EUROsociAL – Workshop Brasilia

  2. European Aspects EUROsociAL – Workshop Brasilia

  3. The European VAT Harmonization • First and Second Directive on turnover taxes (April 1967): • Europe-wide introduction of VAT with input tax deduction until 1th of January 1972 • Sixth Directive on the Harmonization of the Law of the Member States relating to turnover taxes (incl. several directives of amendment) (1977) • General conditions of the European VAT system EUROsociAL – Workshop Brasilia

  4. The Sixth Directive I Regulations and definitions: • Scope • Territoriality • Taxable person • Taxable goods and services • Place of taxable transaction • Chargeable event and chargeability of tax • Basis of assessment • Tax rates, e.g. • Minimum normal rate 15% (since January 2001) • 1-2 reduced rates • minimum 5% • only special items (Annex H) • One tax rate for import and domestic transactions EUROsociAL – Workshop Brasilia

  5. VAT Standard Rates in the European Union 2006 EUROsociAL – Workshop Brasilia

  6. VAT Reduced Rates in the European Union 2006 EUROsociAL – Workshop Brasilia

  7. The Sixth Directive II Regulations and definitions: • … • Tax rates • Tax exemptions • Deduction • Liability for payment of tax • Obligations for taxable persons • Special regulations, e.g. • Small traders regulations • Average rates for agriculture and forestry enterprises • Simplifications • Transitional arrangements EUROsociAL – Workshop Brasilia

  8. The Sixth Directive III • Regulations and definitions: • … • Simplifications • Transitional arrangements • So-called transitional regime for turnover taxation in the European Community (1993) • Abolition of border controls for tax reasons within the EC • Introduction of a tax-free intra-Community supply of goods • Origin regime for tourist traffic • European decision mechanism EUROsociAL – Workshop Brasilia

  9. Turnover Taxation in Germany- VAT System - EUROsociAL – Workshop Brasilia

  10. German VAT System • VAT introduction: 1.1.1968 • VAT: common tax • Legislation: Federation • German legal base: • Turnover Tax Law (UStG) • Turnover Tax Implementing Order (UStDV) • Administration: Länder EUROsociAL – Workshop Brasilia

  11. German VAT System • Legislation: Federation • German legal base • Administration: Länder • Design of the German VAT system: • 2 tax rates: • Standard rate • Reduced rate (in particular to food, printed matter and other cultural supply of goods or services for public benefit, certain health services and local public transport) EUROsociAL – Workshop Brasilia

  12. Development of the German VAT Standard Rate and the Reduced Rate EUROsociAL – Workshop Brasilia

  13. German VAT System • Legislation: Federation • German legal base: • Administration: Länder • Design of the German VAT system: • 2 tax rates: • Standard rate • Reduced rate (in particular to food, printed matter and other cultural supply of goods or services for public benefit, certain health services and local public transport) • Exempt transactions, e.g. • Exports and intra-Community supply of goods • Financial transactions • Renting and leasing • Treatments EUROsociAL – Workshop Brasilia

  14. Design of The German VAT System • 2 tax rates • Exempt transactions • Tax payers: • Traders who carry out taxable transactions and make taxable acquisitions • Persons liable for customs duties (on imports) EUROsociAL – Workshop Brasilia

  15. Design of The German VAT System • 2 tax rates • Tax payers • Tax payable on: • Supplies of goods and services made for consideration by a trader in Germany in the course of his business • Intra-Community acquisition made for consideration in Germany • Importation of goods into Germany EUROsociAL – Workshop Brasilia

  16. Design of The German VAT System • 2 tax rates • Tax payers • Tax payable on: • Supplies of goods and services made for consideration by a trader in Germany in the course of his business • Intra-Community acquisition made for consideration in Germany • Importation of goods into Germany • Deduction of input tax EUROsociAL – Workshop Brasilia

  17. Input Tax Deduction Requirements Requirements in principle: • A trader received • from another trader • a taxable supply of goods and services • for entrepreneurial purposes and • is endued with an invoice (§§ 14, 14a UStG) and • the tax payment is obligatory. EUROsociAL – Workshop Brasilia

  18. The German VAT System Company A Company B Company C Final consumption Purchase10.000 1.600 Purchase20.000 3.200 Buying30.000 4.800 Sale10.000 1.600 Sale20.000 3.200 Sale 30.000 4.800 Tax 1.600 -0 =1.600 Tax 4.800 -3.200 =1.600 Tax 3.200 -1.600 =1.600 • Tax charged at every stage of production and sale • Fractioned payment of VAT by companies in the company-chain • VAT and input tax are autonomous claims which arise in principle from service provision (so called Soll-Prinzip) EUROsociAL – Workshop Brasilia

  19. Design of The German VAT System • 2 tax rates • Tax payers • Tax payable on: • Supplies of goods and services made for consideration by a trader in Germany in the course of his business • Intra-Community acquisition made for consideration in Germany • Importation of goods into Germany • Deduction of input tax • VAT declaration and Collection, Special Announcement Duties EUROsociAL – Workshop Brasilia

  20. VAT Declaration And Collection, Special Announcement Duties • Declaration of VAT • Advance announcement (Umsatzsteuervoranmeldung) • VAT previous year > € 6.136: monthly announcement • € 512 < VAT previous year < 6.136 €: quarterly announcement • Startups: for 2 years monthly announcement • Annual tax declaration • VAT previous year < € 512: only annual tax declaration • Others: annual tax declaration in addition to advance announcements • Charge of VAT • Tax returns and advance payments on a monthly or quarterly basis • Annual final settlement • Summary Statementquarterly (yearly), e.g. • Intra-Community supply of goods • Triangulation EUROsociAL – Workshop Brasilia

  21. Design of The German VAT System • … • Deduction of input tax • VAT declaration and Collection, Special Announcement Duties • Special Features EUROsociAL – Workshop Brasilia

  22. Special Features • Small traders regulations • Average rates for agriculture and forestry enterprises • Liability • Tax audit • „Umsatzsteuernachschau“ • Umsatzsteuersonderprüfung, Betriebsprüfung EUROsociAL – Workshop Brasilia

  23. Turnover Taxation in Germany- Fiscal Aspects - EUROsociAL – Workshop Brasilia

  24. Development of Direct and Indirect Taxes as Share in German Tax Revenue EUROsociAL – Workshop Brasilia

  25. Development of Excise Duties and VAT as Share in Revenue of Excise Taxes EUROsociAL – Workshop Brasilia

  26. Development and Division of German Turnover Taxes VAT introduction 01.01.1968 EUROsociAL – Workshop Brasilia

  27. Division of German Tax Revenue 2005 EUROsociAL – Workshop Brasilia

  28. The End EUROsociAL – Workshop Brasilia

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