German VAT rate returns to 19% 1 Jan 2021

The German standard VAT rate has returned today to 19%. It had been reduced to 16% between 1 July and 31 December 2020 to help businesses and consumers during the COVID-19 crisis. The 7% reduced VAT rate had also been cut to 5%, and returns to 7% today. The VAT rate on hospitality will remain at 7% instead of 19% until 30 June 2021.

You can check all 2021 international VAT rate changes here.

The Federal Ministry of Finance has issued several guidance notes on dealing with the transition period for transactions over the 31 December and 1 January period when the rate rises back to 19%. Important planning points include:

• The time of supply is the correct date to use when determining which VAT rate to appy, and this overrides the normal rule of the earliest date of: sales invoice; payment; or delivery.
• For services, the time of supply is the completion date.
• For goods, it is the transfer of rights to disposal, or use of the goods. Where this includes transport of goods to the customer, it is the date of the start of the journey.
• Ongoing and permanent services (e.g. rentals and leasing) may require a change to the contract since it typically serves as the invoice.
• Advance payments should attract the VAT rate on the date of their payment, but a correction must be made if supply is then made after 31 December 2020.
• Single-purpose vouchers should use the VAT rate at the date of issuance.