PKF newsletter

VAT – New Guidelines  for Leases and Lower  Requirements for Invoices

Deciding whether, for VAT purposes, a finance lease agreement should be assessed as being a supply (purchase) or other services (rent) would, at present, be determined by the applicable income tax criteria for beneficial ownership (so-called leasing enactments). A substantial revision to the VAT treatment of finance lease agreements is currently expected. In a draft circular from 3.12.2019, the Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) set out plans to incorporate new ECJ case-law into the ordinance on the application of VAT (Umsatzsteueranwendungserlass, UStAE) and, thus, to move away from income tax criteria. The question of how existing agreements should be treated is just as important here as how to deal with divergences that might possibly occur in the future between income tax and VAT.