To mitigate the economic consequences of the Corona crises, the German government has announced a temporary decrease in the VAT rate from 1 July 2020 to 31 December 2020. The standard VAT rate is supposed to decrease from 19 % to 16 % and the reduced VAT rate from 7 % to 5 %.
The decrease of the VAT rates requires enterprises to change systems and processes in IT and accounting, to check and, if necessary, adjust contracts. Moreover, an eye should be kept on invoices and the correct statement of VAT. If VAT is overstated in an invoice, the enterprise is generally liable for the overstated VAT and the recipient is not entitled to deduct the overstated VAT as input VAT.
FAQ – What enterprises need to do due to the temporary decrease of the German VAT rate