Germany reduces VAT rates temporarily

The German Government has announced a temporary VAT cut-out from 19% to 16% on the standard rate, and from 7% to 5% on the reduced rate.

Reduced VAT rates in Germany

German VAT rates will be reduced to increase consumption and facilitate the economic recovery after the lockdown imposed by the Coronavirus. The recently announced measure will remain applicable for a limited time frame: it will enter into force as from 1 July, 2020, until 31 December, 2020, and it will concern both the standard VAT rate, which will be reduced from 19% to 16%, and the reduced VAT rate, which will be reduced from 7% to 5%.

The Value Added Tax cut-out aims to stimulate the consumption after the prolonged lockdown, and it joins to previous measure published concerning the change on the VAT rates on German restaurant services.

This tax relief measure is part of a EUR 130 billion package – the largest in Europe, approved by the German Government to help the economy to recover from the economic consequences of the pandemic. The package includes financial incentives for electric and hybrid vehicles, childcare facilities, family cash bonus, climate change measures as well as an important investment on innovation and digitalization, among others.

How can Marosa help you?

It is important to stay up to date with the applicable VAT rates in Europe. Our overview on VAT rates can help you, although a detailed analysis should be made on specific products for which the CN code and detailed legislation must be reviewed. When VAT rates change, it is important to understand tax point rules to make sure that the correct VAT rate is charged on the invoice. If credit notes are issued, you should also take into account the correct rules to ensure that transactions spanning periods on which different rates apply are treated correctly.

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Contact us to get help with the analysis of VAT rates on products sold by your business across Europe.


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