news - German Tax News

New VAT rules for legal persons under public law

As of January 1st 2016 in the German VAT law, the new article 2b VAT law was launched. The scheme, which was adopted under the Taxation Act of 2015, contains innovations in the turnover taxation of legal persons under public law.

According to article 2b VAT law the demarcation over the business of an industrial type will no longer play a role in VAT. The new regulation leads to an expansion of the entrepreneurial status for the persons under public law. Paragraph 1 corresponds essentially to Article 13 of the EU Value Added Tax Directive.

Activities carried out by legal persons under public law within the framework of public authority, so called assistance services, are not in the sense of the VAT act. If, on the other hand, a legal person provides services on a private legal basis and therefore under the same legal conditions as private economic operators, these activities are not covered by article 2b VAT law and are therefore subject to value added tax.

With regard to the article 2b VAT law which is taking effect, a transitional arrangement is included. To this arrangement it’s possible to apply the existing legal situation to all services performed before 1st January 2017.