BFH strengthens companies in the event of VAT mishaps
Background:
In VAT law, the so-called debit principle generally applies: VAT is incurred when the service is performed, regardless of the time of payment by the customer. Only those who have applied to the tax office for actual taxation may calculate the tax according to the actual receipt of payment.
The case:
A GmbH provided repair services for vehicles from a specific manufacturer. The services were provided in 2012, but were not paid for by the manufacturer until 2013 and, contrary to the statutory provisions, were not taxed until 2013. As a debit taxpayer, the GmbH should have already paid tax on the sales in 2012.
As part of an external audit (for the years 2013 to 2015), the VAT for 2013 was corrected. The tax office recorded both the services actually provided in 2013 and the services from 2012 that were taxed late. A correction in 2012 was no longer possible under procedural law at this time.
The taxpayer demanded a correction of the VAT for 2013 and referred to errors in the assessment basis. Specifically, it wanted to ensure that a remuneration amount of around EUR 32,518 that was already outstanding at the end of 2012 was taken into account retroactively, as the associated service was also provided in 2012 and should therefore also have been taxed in that year. However, the tax office rejected the correction on the grounds that a change for 2012 was no longer permissible due to the expiry of the limitation period.
The decision of the BFH (judgment of 29.08.2024, ref. V R 19/22):
The Federal Fiscal Court ruled in favor of the taxpayer:
A correction is possible even if the actual year of performance has already been completed under procedural law. The mere fact that a correction of the original year is no longer permitted does not prevent a tax correction in the year of the incorrect taxation.
Conclusion for practice:
When taxing turnover, care must be taken to ensure the correct timing of the provision of services, particularly in the case of periodically recurring services or invoicing at the turn of the year. If tax is erroneously levied according to the time of payment, although the debit principle applies, this can lead to a double tax burden. The current BFH ruling allows affected companies to make a retrospective correction in favor of the taxpayer.
Recommendation for action:
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Companies that pay tax according to the debit principle should be particularly careful when settling their accounts around the turn of the year.
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A regular review of accounting and billing processes can help to avoid errors in VAT allocation.
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If incorrect taxation is found, it is worth checking for correction options, even if the original year is already time-barred.
