Modification of the tax base for complete or partial non-payment of considerations for delivery of a good or service – §25a
Under the new legislation, a payer may modify their tax base for the delivery of a good or service (for which they were obliged to pay tax) if their customer does not pay for the delivery of such good or service in part or in full after the establishment of such tax liability and its receivable becomes unenforceable. The payer may then reduce their tax base by a maximum of an amount equal to the unpaid considerations for the delivery of the given good or service. The difference between the original and the modified tax base and the tax shall be reported by the payer in the tax period in which the receivable becomes unenforceable.
A receivable is considered unenforceable under §25a (2) based on an exhaustive list of legal circumstances, which effectively means that not all receivables will be eligible; specifically this includes, for instance, receivables in collections within distraint proceedings, receivables declared within bankruptcy proceedings, receivables involving debtors in restructuring, debtors who have been dissolved without a legal successor and the like.
Modification of deducted tax in the case of an unenforceable receivable – §53b
Modification of the deducted tax in the case of an unenforceable receivable is related to the newly created §25a.
Under the assumption that a receivable becomes unenforceable and the payer exercises its right to reduce its tax base under §25a, the customer who failed to pay for the delivery of a good or service and exercised its right to a tax deduction is obliged to modify their tax deduction. The customer shall then modify their tax in the tax period in which they receive evidence of tax base modification from their supplier.
New template for the VAT return and new return for the control statement
A new template for the VAT return enters into force on 1 January 2021.
Given the amendment of VAT legislation to include the ability to modify the tax base related to unenforceable receivables, the currently valid control statement should be modified so as to permit the reporting in the control statement of modification of the tax base under §25a and modification of the deducted tax under §53b. The new template of the control statement should first be used for the tax period beginning on 1 January 2021 at the earliest.
In case of question, please feel free to contact our tax department: Kristina.firstname.lastname@example.org