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Lower Finance Court rules on VAT implications of installment-based agreements

Global Tax Update:December 2016/Germany

The Finance Court of Lower Saxony issued a decision on August 18, 2016 on the VAT implications of installment payments where payment is due more than two years after the actual supply is made. (Global Tax Update:December 2016/Germany)

If due date is more than two years after the supply, the installment may be treated as a bad debt so that full VAT liability would arise only after payment is received.

The Finance Court of Lower Saxony issued a decision on August 18, 2016 on the VAT implications of installment payments where payment is due more than two years after the actual supply is made.

In general, the tax point for German VAT purposes is the actual supply date. Any delays in payment should not affect the VAT liability of the supplier unless there is a default in payment within the meaning of the bad debt rules; this generally requires an unequivocal refusal to pay by the customer or where the customer is unable to pay.
 

>> Click for Japanese [ドイツ下級裁判所が、分割払い契約のVAT上の取扱いを判示]

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