Manage sales tax effectively. Identify risks early.
Whether it’s international supply chains, new business models, e-invoicing, or special VAT audits: VAT arises right in the midst of business processes.
Our sales tax experts assist medium-sized companies with national and international issues—from assessing individual business transactions to designing robust processes and structures.
Partner, Tax Consultant
Balingen
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Partner, Auditor, Tax Consultant
Stuttgart
A new supply chain, an invoice from abroad, a different ERP setup, or a restructuring can have implications for sales tax. Errors often don’t come to light until a special sales tax audit or a general tax audit—and can then have an immediate impact on liquidity.
Our specialists combine expertise in sales tax law with an understanding of accounting, supply chains, and business processes. This enables us to support you not only with tax assessments but also with practical implementation.
Cross-border flows of goods and services can quickly raise complex sales tax issues.
Among other things, we provide support with:
Are your sales tax processes robust?
We analyze business transactions and processes, identify risks, and highlight specific opportunities for improvement.
Depending on your needs, we review specific areas or conduct a more comprehensive sales tax audit—from invoicing and input tax deductions to the correct accounting of recurring business transactions.
Sales tax requirements must be entered correctly into the system. Incorrect tax codes, incomplete master data, or improperly configured processes can carry over into thousands of business transactions.
We provide support for:
International business activities may trigger sales tax registration and reporting requirements in other countries.
Through PKF Global, we coordinate with local sales tax experts as needed and assist in meeting cross-border reporting, registration, and compliance requirements.
If a special sales tax audit or a general tax audit is announced, we will assist you with your preparations and throughout the entire process.
This includes, in particular:
Even when structural changes occur within a company, sales tax should be taken into account early on.
For example, we provide advice on:
Sales tax doesn't stop at state lines.
New customers, suppliers, production sites, or distribution channels can quickly trigger sales tax obligations in multiple countries.
Through the international PKF Global Network, we engage local experts and centrally coordinate cross-border issues.
You’ll have a dedicated point of contact at the PKF Wulf Group while also gaining access to local expertise in the relevant markets.
For construction and trade companies, sales tax is part of day-to-day business.
At the same time, issues regarding the allocation of revenue from construction services, subcontractors, and various clients repeatedly pose risks.
Our sales tax experts understand the unique characteristics of the industry and assist construction companies, general contractors, real estate developers, and trades businesses in ensuring their business transactions are recorded in a legally compliant manner.
The focus is particularly on:
Especially for construction services, the correct classification determines who is liable for sales tax.
We review the specific service provided, the client’s status, and the required documentation, and assist in ensuring that the correct VAT treatment is reflected in invoicing and accounting processes.
In the construction industry, the date of service provision, acceptance, and invoicing may not coincide.
In practice, this frequently raises questions about when VAT becomes due and how to correctly handle progress, pro forma, and final invoices.
Our specialists integrate VAT assessment with the company’s actual project and billing processes.
Our Sales Tax Experts
When it comes to sales tax, the correct treatment of a business transaction often hinges on the details.
That is why we rely on specialized advisors who are constantly engaged with national and international sales tax issues and, at the same time, understand the practical operations of small and medium-sized businesses.
Under the reverse-charge procedure, it is not the supplier but the recipient who is liable for value-added tax. Section 13b of the German Value-Added Tax Act (UStG) covers various situations—including certain services provided by foreign businesses, construction services, building cleaning services, and other transactions specified by law.
For cross-border services, the first step is to determine where the service is deemed to be performed for VAT purposes. It also depends on whether the supplier is resident in Germany or has a permanent establishment involved in the service, and on who is liable for the VAT.
A foreign connection alone is therefore not sufficient to apply the reverse charge mechanism.
In the case of domestic construction services, the tax liability generally passes to the recipient of the services if the recipient is a business and provides construction services on a permanent basis. According to the administrative interpretation, this is generally assumed to be the case if at least 10 percent of the recipient’s worldwide revenue is attributable to construction services.
A valid certificate based on the USt 1 TG form establishes or confirms a legal presumption that construction services are provided on a regular basis. However, it is not the sole prerequisite for the application of Section 13b of the German Value-Added Tax Act (UStG) and should not be equated with a substantive review of the specific construction service.
It is also decisive whether a construction service within the meaning of value-added tax law actually exists. In particular, this includes services for the construction, repair, maintenance, alteration, or demolition of structures. A construction service must, in principle, have a direct impact on the substance of the structure. Pure planning and supervision services are generally not included.
Particularly in the case of general contractors, developers, subcontractors, and mixed service packages, the classification should be verified before invoicing.
Not automatically. A real estate developer who builds on his own land for the purpose of sale is, in principle, making a supply of real property. That alone does not make him a contractor providing construction services for the purposes of Section 13b of the German Value-Added Tax Act (UStG).
The assessment may differ if the developer also performs construction services within the meaning of the value-added tax law—for example, as a general contractor—and the requirements for the sustained provision of construction services are met.
When issuing invoices, therefore, the client’s specific activities, their service relationships, and a certificate valid at the time of service provision—in accordance with the USt 1 TG form template—should be taken into account. The certificate does not replace the assessment of whether the remaining requirements of Section 13b of the German Value-Added Tax Act (UStG) are met.
For value-added tax purposes, the concept of a permanent establishment is generally decisive. It is not automatically equivalent to the concept of a permanent establishment under income tax law.
A permanent establishment generally requires a sufficient degree of permanence, as well as the necessary personnel and technical resources, to enable the entity to receive and use services for its own needs or to provide services itself.
A foreign VAT identification number, mere VAT registration, or a mailing address does not, in and of itself, constitute a permanent establishment.
This distinction can have implications for the place of supply, invoicing, the reverse-charge procedure, and foreign registration requirements.
Registration may be required, for example, if a business makes local deliveries in another country, transports goods there or stores them there, ships goods out of that country, or if certain services are subject to tax there.
Whether registration is actually required depends on the specific business model and national sales tax laws. Under certain conditions, reverse-charge rules, the consignment inventory rule, or special EU procedures may allow a business to avoid registration.
The registration requirement should therefore be assessed, if possible, before establishing a new supply chain, warehouse structure, or business model.
In a chain transaction, several businesses enter into supply transactions involving the same item, while the goods are transferred directly from the first supplier to the final recipient.
For VAT purposes, the movement of goods can generally be attributed to only one supply. Only this specific supply can generally be treated as a tax-exempt intra-Community supply in the context of cross-border EU transactions.
Key factors include who arranges or carries out the transport, which VAT identification number the intermediary uses, and at which point in the supply chain the movement of goods is to be attributed to their supply. This attribution can affect the VAT treatment of all supplies in the chain.
An intra-Community triangular transaction may occur when three businesses in three different EU member states enter into transactions involving the same goods, and the goods are transferred directly from the first supplier to the final customer.
If the requirements of Section 25b of the German Value-Added Tax Act (UStG) are met, an additional value-added tax registration in the country of destination can be avoided, particularly for the middle business.
This simplification requires, among other things, that the businesses are registered for value-added tax purposes in the relevant Member States, that the correct value-added tax identification numbers are used, and that the invoices and the recapitulative statement are prepared correctly. Errors can result in the simplification not applying and additional tax or registration obligations arising.
If goods are transferred to a warehouse in another EU member state, this may generally require VAT registration in the country of destination.
For certain consignment inventory or call-off stock situations, Section 6b of the German Value-Added Tax Act (UStG) provides for a simplification. For this to apply, among other requirements, the intended purchaser must be identified at the start of transport, the purchaser’s VAT identification number issued by the destination Member State must be known, and the statutory record-keeping and reporting obligations must be fulfilled.
The delivery to the purchaser must generally take place within twelve months after the end of the transport or shipment. If this deadline is exceeded or if another requirement is no longer met, an intra-Community transfer may be triggered. Changes in the purchaser’s status, loss of goods, or deviating movements of goods may also alter the VAT treatment.
Companies that pay foreign value-added tax—for example, on business trips, at trade shows, or for projects—can reclaim this tax under certain conditions through the input tax refund procedure.
This procedure generally applies if the company has neither its registered office nor a permanent establishment in the country where the refund is sought and does not carry out any transactions there that would trigger regular sales tax registration. Special exceptions apply to certain transactions—such as those for which the recipient of the service is solely liable for the tax, or intra-Community acquisitions.
In addition, the input tax deduction restrictions and formal requirements of the respective refunding country must be observed. Therefore, it should first be determined whether the refund procedure is applicable or whether a local registration requirement already exists.
A VAT group may be formed if, based on the overall picture of the actual circumstances, a legal entity is financially, economically, and organizationally integrated into the parent company’s business.
If the requirements are met, the domestic business units are generally treated as a single business for VAT purposes. VAT obligations are consolidated with the parent company; internal transactions between the domestic business units are generally not subject to tax.
Unlike in the case of a tax election, a VAT group generally arises by operation of law once the statutory requirements are met. In the case of ownership structures, business acquisitions, or changes to management and organizational structures, it is therefore important to assess whether a VAT group is formed, terminated, or modified.
As a general rule, the prerequisites for claiming an input tax credit are that a service was purchased for the business, the statutory requirements are met, and the necessary supporting documentation is available. For input tax amounts arising from purchases, this typically includes a valid invoice. Special requirements may apply in certain cases to import sales tax, intra-Community acquisitions, and tax owed under Section 13b of the German Value-Added Tax Act (UStG).
Risks arise, for example, from:
Foreign sales tax is not considered German input tax and cannot be deducted via the German advance sales tax return. In such cases, it must be determined whether an invoice correction or an input tax refund procedure in the respective country is an option.
Particularly in the case of large procurement volumes, transactions, or international situations, the right to deduct input tax should be reviewed at an early stage.
An incorrect or unauthorized VAT statement may result in a VAT liability for the issuer of the invoice under Section 14c of the German Value-Added Tax Act (UStG). This applies, for example, when VAT is shown on the invoice even though the reverse-charge procedure should have been applied.
The invoice recipient is not automatically entitled to a tax credit based on an incorrectly stated tax amount. Rather, it should be determined whether the invoice needs to be corrected, the stated tax adjusted, and the tax credit revised.
In reverse-charge situations, the supplier may generally not show sales tax separately. Instead, the invoice must contain a clear indication that the recipient is liable for the tax.
Anyone who subsequently realizes that a filed tax return or advance sales tax return is incorrect or incomplete—and that this may have resulted in underreported taxes—must comply with the reporting and correction requirements under Section 153 of the German Fiscal Code (AO). The correction must generally be made without delay.
Therefore, it is generally not a good idea to simply let known errors stand until the annual sales tax return is filed. Whether and how to correct them depends on the individual case, the period in question, and the tax implications.
In the case of recurring or systematic errors, an additional review should be conducted to determine their cause—for example, whether they stem from master data, tax codes, interfaces, or faulty process logic.
The scope depends on the company's business model and risk profile. Typical areas of review include, for example:
The goal is not merely to identify individual errors. It is also about determining whether recurring business transactions are consistently and accurately recorded within the company.
We analyze the relevant business transactions and processes, review documents and supporting evidence, and assist in preparing responses to inquiries from the tax authorities.
In particular, this involves structuring the facts at an early stage, quantifying potential risks, and developing technically sound positions. If necessary, we assist with communication with the tax authorities as well as with appeals and other legal remedies.
Yes. For cross-border shipments, registrations, or local sales tax issues, we can engage experts in the respective country through PKF Global.
Upon request, coordination is handled centrally by the PKF Wulf Group. For internationally active medium-sized companies, this means having a single point of contact for the overall structure and access to local sales tax expertise wherever it is needed.
Whether it’s a single business transaction, an international supply chain, a construction project, or a comprehensive process review: Our sales tax experts will help you identify risks early on and implement practical solutions.