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In brief

Germany has started to allow retroactive invoice corrections under certain conditions. The German legislator will clarify in the new draft law that such invoice correction will not allow the parties to re-enter VAT filing periods that have already been statute-barred or that are at least no longer subject to legal review.


New rule on retroactive invoicing (January 2021)

Based on case law of the European Court of Justice, Germany has started to allow retroactive invoice corrections under certain conditions (which allow the recipient a retroactive input VAT deduction). However, the German legislator will clarify in the new draft law that such invoice correction will not allow the parties to re-enter VAT filing periods that have already been statute-barred or that are at least no longer subject to legal review (under the general rules of the German tax code). This implies that the retroactive invoice correction can also be to the disadvantage of the service recipient, e.g., in scenarios where the recipient cannot get the input VAT deduction at all. This is because the retroactive effect of the invoice correction is not optional (i.e., not subject to the preference of the parties). Based on German case law, the retroactive effect of the invoice correction is obligatory if an invoice actually meets the legal requirements (for the retroactive effect), which is the case if the original invoice meets certain minimum criteria specified by tax decrees and German case law. Taxpayers must therefore ensure that they correct such invoices in time. The tax courts do not tolerate a circumvention of such scenarios by simply nullifying an old invoice and issuing a fully new invoice; this method would still be regarded as an “invoice correction” with obligatory retroactive effect (if the old invoice had met the specified minimum criteria).

Author

Jochen Meyer-Burow is a German attorney at law with a Master degree in German Tax Law, and an LL.M. in Indirect Taxation and Information Technology Law of the University of London. Mr. Meyer-Burow frequently authors legal articles and comments on current VAT matters in domestic and international publications. He is a regular contributor of the VAT advisor journal in Germany (UStB) and a commentator in the upcoming HDS-commentary for German value added taxes. Mr. Meyer-Burow is a Member of the firms European VAT Steering Committee and was an active member of Baker McKenzie’s European Indirect Tax Practice which received the first European Indirect Tax Firm of the Year Award. He has been listed among leading Indirect Tax Experts for several years (International Tax Review). Together with Baker McKenzie’s German Tax Practice Group, he was nominated for several Juve Awards, contributing one of his larger retail-related cases he shared in the European Media & Entertainment Tax Team of the Year Award for Baker McKenzie in 2012 (ITR). Prior to joining the Firm, Mr. Meyer-Burow worked as a VAT attorney with PricewaterhouseCoopers and KPMG in Germany, and as legal counsel in New York and London.