For the period from July 1, 2020 to December 31, 2020, the sales tax in Germany will be reduced from 19% to 16% for the standard tax rate and from 7% to 5% for the reduced tax rate. The application of the tax rate is based on the performance date.
For companies entitled to deduct input tax, it does not matter whether the service was received before or after the time of the tax rate change; it is important that a correct invoice is available. Invoice defects lead to the loss of the input tax deduction. However, if services are rendered to recipients who are not entitled to deduct input tax, they should be carried out during the above-mentioned period if possible.
For deliveries and services that with certainty will be carried out during the above-mentioned period, down payment invoices can now be issued with the reduced tax rates of 16% or 5%.
For deliveries and services in the period mentioned above, for which advance payment was made, the final invoice must be made at the reduced tax rates of 16% or 5%.
Example: I ordered a smartphone in June 2020 and paid an advance (with 19% sales tax), but which I will receive in July 2020. For the smartphone, I have to receive a final invoice with 16% sales tax in July 2020, the total invoice amount is reduced.
For deliveries and services that were not fully performed in the above-mentioned period, but for which a down payment was made in this period and the final invoice and final performance will take place in 2021, the final invoice must show 19% and 7% sales tax, respectively.
Exemption and transitional regulations - rental contracts, gas, electricity, telephone, deposit, bonus payments, etc. - are expected to come from the German federal government.