A business based in the UK leased exhibition space at trade fairs in Germany to German customers. The UK business did not see that the services in this special relationship were subject to the reverse charge mechanism and incorrectly charged German VAT. By trying to correct the wrong invoicing, the tax authorities refused a refund of VAT to the UK business.
The Federal Court of Finance (BFH) confirmed that a business, which incorrectly charges VAT, is in general liable to pay these amounts to the authorities (Art. 14 c par. 1 sent. 2 German VAT Act, Art. 203 of Directive 2006/112/EC). But different to the option of the authorities, who asked for the issue of new invoices, the court states that for a sufficient correction an assignment note can be considered as proper correction. The court points out that the requirements for the correction must not be overstretched, but that business needs should be taken into account.
It is welcome that the BFH simplifies the correction of incorrectly charged VAT. Even an assignment note can be a sufficient correction note. However, it should be considered that the case on hand is characterised by a simple business relationship. For more complex business relationships it is highly recommend to forward a clear and specific correction note. This can be done by a document listing the concerned invoices and incorrect VAT amounts subject to the correction.