VAT Changes in 2018: What Companies Need to Know

As of early 2018, several value-added tax (VAT) regulations have been updated, significantly affecting real estate transactions, the classification of partnerships, and the tax exemption for voluntary activities. The consulting firm dhpg has outlined the key changes that require companies to adjust their practices.

A primary alteration concerns the VAT treatment of real estate sales. The option to treat property sales as subject to VAT must now be exercised directly within the original purchase agreement. A previous transitional rule, which allowed for later contract amendments, expired at the end of 2017. This necessitates seeking tax advice before finalizing property deals, as errors in procedure could lead to substantial financial losses, particularly concerning the loss of input VAT deduction rights.

The status of partnerships within the VAT framework has also seen adjustments. While previously partnerships were generally not considered 'fiscal units' for VAT purposes, new interpretations now allow this under specific conditions. Companies can opt to continue applying the prior administrative practice until the end of 2018. Beyond this, businesses must evaluate whether being classified as a fiscal unit is advantageous or should be avoided, potentially requiring structural reorganizations.

Furthermore, the criteria for VAT exemption for voluntary activities have been tightened. Simply stating activities in statutes is no longer sufficient to qualify for exemption. Similarly, the treatment of consignment stock has been revised, allowing certain arrangements to be treated as direct deliveries under specific conditions. The former administrative practice for these situations can also be applied until the end of 2018.

These legislative shifts mandate careful preparation and strategic planning by companies to mitigate tax risks and ensure compliance from 2019 onwards.