Due to a lack of official guidance, an input VAT deduction on services received by foreign SPVs with Germany property could be challenged.
The VAT place of supply rules for services were changed as from 1 January 2010 to implement the EU VAT package. As consequence of the new rules, the input VAT deduction on services received by foreign SPVs with Germany property could be questioned by the tax authorities. Under the new rules, services provided to businesses (B2B) generally take place where the business customer is resident. If the services are provided by a foreign supplier, the recipient is obliged to self account for VAT under the reverse charge mechanism in the Member State in which it is established. The supplier must issue an invoice to the relevant SPV without VAT, but with a reference to the applicability of the reverse charge mechanism.
To enable the tax authorities to verify that services were actually performed for another business (VAT-taxpayer), the service supplier must include the recipient’s VAT ID of the country of residence on the invoice and declare the recipient’s VAT ID and the amount invoiced in the EC Sales List. However, SPVs that carry out their business activities in another EU Member State often are unable to provide a VAT ID from their member state of residence. In these cases, it would be difficult for the supplier to demonstrate that the services provided to the SPVs are B2B supplies. Nevertheless, despite the lack of a VAT ID in their state of residence, SPVs can be considered VAT taxpayers because of their VAT-taxable business activities abroad.
However, due to the missing VAT ID, most suppliers tend to issue the invoices for their services to these SPVs with local VAT; this is in fact incorrect because the service is provided to a business located in another EC Member State. Any refund request by the recipient likely would be challenged by the tax authorities. In many EU Member States, there is no official guidance available on how to address these situations.
Contacts
Dr. Bettina Lieber | Düsseldorf
Petra Peffermann | Frankfurt
