In VAT law, a distinction is made between the so-called actual taxation and the nominal taxation. The latter is the rule, while the actual taxation is only applied in exceptional cases. This requires permission from the tax office.

According to new case law of the Bundesfinanzhof (BFH), this allowance for actual taxation according to § 20 UStG is usually not revocable. There should be regularly no abuse of the permit. However, this was accepted before the judgment if there is a tax risk resulting from the time difference between the taxation of the supplier and the deduction of the VAT paid by the recipient. We explain when an actual permit can be revoked.

1. Actual taxation

1.1. Definition of actual taxation

Actual taxation concerns cases in which taxation only takes effect when the consideration owed for the turnover has already been paid. By contrast, the setpoint taxation already takes effect at the time at which the power was provided. Therefore, it is not necessary that the entrepreneur has also co-opted them. The actual taxation has considerable advantages for the entrepreneur compared to the nominal taxation. The service provider does not have to pre-finance the tax payment on his sales. It therefore suffers no liquidity disadvantages.

1.2. Background: European law

1.2.1. In principle, nominal taxation

The basis for the distinction between actual and target taxation is European law – more precisely the VAT system directive. Unlike German law, this distinguishes between the taxable event and the tax liability. Taxable event means the event by which the legal requirements for tax liability are fulfilled. Tax liability, on the other hand, is the right to payment of the tax which the Treasury can claim against the taxpayer from a certain point in time.

The basis for the debit taxation is Article 63 of the VAT Regulation. Accordingly, the chargeable event and chargeability occur at the time when the supply of goods or services is effected. This time is the execution of the turnover. This applies irrespective of whether the consideration due for this turnover has already been paid. Therefore, the supplier owes VAT to the Treasury even if he has not yet received payment from the recipient for the turnover effected.

1.2.2. Possibility of derogation for Member States for actual taxation

By way of derogation, Member States may provide that VAT shall not become chargeable to certain transactions or categories of taxable persons until the price is collected. This is the basis for the possibility of actual taxation as a deviation from nominal taxation.

In terms of discretion, the European Court of Justice (ECJ) grants the Member States a wide margin of manoeuvre. For example, a Member State is therefore not obliged to set a specific time limit from the forfeiture of the chargeable event for which VAT has become chargeable. In addition, Member States can link actual taxation to the size of companies, the division and special requirements of company law or direct tax law. Only a general application of the actual taxation to all deliveries and other services of each entrepreneur should not be permitted.

1.3. Implementation by the UStG

The provisions of EU law are implemented in accordance with EU law in the German VAT Act. According to § 13 (1) no. 1 letter a sentence 1 UStG in conjunction with § 16 (1) sentence 1 UStG, the rule is taxation according to agreed fees in the sense of the nominal taxation. Only in exceptional cases is a taxation according to received fees in the sense of actual taxation possible. These exceptional cases are regulated in § 13 (1) no. 1 letter b) UStG in conjunction with § 20 UStG. They require permission from the financial authority.

2nd requirement for the actual taxation according to § 20 UStG

There are clear legal requirements for allowing actual taxation. They are regulated in § 20 UStG. Accordingly, the tax office can, on application, allow the actual taxation for entrepreneurs,