Further extension of the transition period for treating public bodies as VAT taxable persons

Historically, German VAT law never considered public bodies as VAT taxable persons unless their activities were commercial in nature. After the CJEU found that position was not compatible with EU law, the German legislator introduced several provisions into the German VAT Act, which came into force in January 2017.

Since 2017, public bodies providing services whereas acting outside the scope of their public functions, are subject to the general provisions of VAT law. In so far as the service in question is not tax-exempt under Section 4 of the German VAT Act, VAT is applied. Where services provided are governed by public law and the conditions set out in Section 2b of the German VAT Act are met, an exemption might apply.

Key takeaway

Even though the extension of the transition period was implemented at the last second as the extension was initially going to end on 31 December 2022. This extension gives public bodies the opportunity to reconsider the organisation of their accounting departments and implement tax compliance processes to meet the requirements set by German VAT law.