In addition to keeping manual files, professionals have to fulfil even more far-reaching recording obligations, for example under the Money Laundering Act. In addition, internationally active professionals are subject to additional special reporting obligations under the German Value Added Tax Act and the Foreign Trade and Payments Ordinance. The main features are presented below:
I. Turnover tax in the internal market
Pursuant to § 1 I No. 1 UStG, services are subject to turnover tax in Germany (= according to ö 1 II 1 UStG, the territory of the Federal Republic of Germany with the exception of duty-free zones), if
1. the person providing the service fulfils the entrepreneurial status in accordance with § 2 UStG and
2. the place of supply of services for consideration pursuant to § 1 I No. 1 UStG is within Germany.1
In the case of taxable supplies, the taxable person is required to provide certain information to the competent authority.
1) Entrepreneur
Entrepreneurs within the scope of § 2 UStG are natural and legal persons, as well as associations of persons, provided that commercial or professional activities are independently carried out by them.
According to § 1 BRAO, a lawyer is an independent organ of the administration of justice who exercises a liberal profession and whose activity is not of a commercial nature according to § 2 BRAO.2
This applies accordingly to the tax consultant, § 32 II StBerG.the professional is thus an entrepreneur in the sense of ö 2 1 UStG. These requirements for entrepreneurial status are not limited to German professionals.3
2) Place of performance
The services of a trader fall under the concept of other services which, according to § 3 IX in conjunction with § 3 I UStG, do not constitute supplies. § 3 I UStG do not constitute supplies.4
In order to determine taxability, the following principles must be distinguished; in addition to the place of supply, the type of service, such as the recipient of the service, also has an effect on the taxability of the service.5
(a) the place-of-business principle
In principle, the place of business principle according to § 3 a) I 1 UStG in conjunction with § 21 AO is relevant. § 21 AO is relevant.6 Accordingly, the place of performance is the place from which the entrepreneur operates his business. With respect to a professional, this is the location of his or her office.7
By way of exception, according to § 3a) I 2 UStG, the permanent establishment of the enterprise is deemed to be the place of performance if the other performance is carried out by it and the corresponding turnover is actually attributable to it.8 Although the term “permanent establishment” refers to undertakings engaged in commercial activities, an analogous application of the term is applicable to law firms of the legal professions to which the turnover of the undertaking must be attributed.9 A distinction must be made here between independent and dependent operating units or offices. Whereas the aforementioned applies to the independent permanent establishment, supplies that economically emanate from dependent permanent establishments are not taxable.10 According to § 2 UStG, these do not constitute a business. It is important for this attribution that the other services have been performed by the members of the dependent permanent establishment.11
On the other hand, who or which part of the company received the order is not taken into account.12
The consequence of the place of business principle is the taxation of the service in the country in which the place of business of the supplying company is located.13
The following services are covered by the place-of-business principle:
– Consultancy services to non-entrepreneurs in the EU14
This also includes the representation of clients before courts, authorities, as well as contract negotiations 15, even if the litigation does not take place at the place of the law firm’s registered office but at the place of jurisdiction 16
– Non-typical legal services provided to non-entrepreneurs in the EU 17
1Rademacher, Claudia, Cross-border services of lawyers and tax advisors in turnover tax law – Part I, INF 1997, 385 (385)
2Ahrens, Hans-Jürgen, Die Stellung des Rechtsanwalts – Berufspflichten und prozessuale Fairneß, in: Gilles, Peter, Anwaltsberuf und Richterberuf in der heutigen Gesellschaft, Baden-Baden 1991, p. 21
3Pott, Hans-Michael/Geibel, Stephan, Umsatzsteuer und grenzüberschreitende Anwaltsleistungen, BRAK-Mitt. 1995, 149 (149)
4dito; Schultz, Florian, Umsatzsteuerausweis in Rechnungen international tätiger Anwalts- und Notarkanzleien, AnwBl. 1996, 553 (553)
5Schultz, Florian, Umsatzsteuerausweis in Rechnungen international tätiger Anwalts- und Notarkanzleien, AnwBl. 1996, 553 (553)
6Rademacher, Claudia, Grenzüberschreitende Leistungen von Anwalten und Steuerberatern im Umsatzsteuerrecht – Teil I, INF 1997, 385 (386); 6Pott, Hans-Michael/Geibel, Stephan, Umsatzsteuer und grenzüberschreitende Anwaltsleistungen, BRAK-Mitt. 1995, 149 (150)
7Pott, Hans-Michael/Geibel, Stephan, Umsatzsteuer und grenzüberschreitende Anwaltsleistungen, BRAK-Mitt. 1995,149 (150)
8Rademacher, Claudia, Cross-border services of lawyers and tax advisors in turnover tax law – Part I, INF 1997, 385 (386)
9dito; Pott, Hans-Michael/Geibel, Stephan, Umsatzsteuer und grenzüberschreitende Anwaltsleistungen, BRAK-Mitt. 1995, 149 (150)
10Rademacher, Claudia, Cross-border services of lawyers and tax advisors in turnover tax law – Part I, INF 1997, 385 (386)
11dito
12dito
13dito
14dito (389)
15dito (387)
16dito (386)
by lawyer Johannes Fiala (Munich) and Sandra Seremek (Eggenfelden)
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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