Back to home
URL: http://www.deloitte-tax-news.de/german-tax-legal-news/bmf-issues-guidance-on-vat-treatment-of-security-held-in-the-construction-industry.html
25.08.2015
German Tax and Legal News

BMF issues guidance on VAT treatment of security held in the construction industry

The guidance limited application to situations where full payment is received significantly later than the date of the supply to security held within the construction industry

Germany’s Federal Ministry of Finance (BMF) issued a circular on August 3, 2015 that provides guidance on the VAT treatment of amounts held as security.

The circular implements a 2013 decision of the Federal Fiscal Court (BFH) (see Deloitte Tax-News of February 2014), in which the BFH held that where a supplier is unable to fully collect the consideration owed to it within a two to five-year period because a contractually agreed amount is held back as security, that amount may be considered a bad debt at the time of the supply. The amount held as security will reduce the taxable base of the supply, provided the security could not be provided by other means, such as a bank guarantee. As a consequence, the supplier is liable for the remaining VAT only at the time the security amount is released.

The guidance implementing the BFH decision is very narrow because it applies only to amounts held as security in the construction industry instead of extending it to all cases where businesses are obliged to pre-finance VAT for a significant period of time.

www.deloitte-tax-news.de Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.

This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.