In a recently published decree from the German Ministry of Finance (MoF) dated 17 December 2021, the MoF commented on this provision and specific delimitation questions.
In essence, the main findings of the MoF can be summarized as follows:
- No reduction in the VAT rate can be considered if the electronic media product clearly exceeds printed books, newspapers or magazines in its function. However, the digital filter option or links alone do not preclude the applicability of the reduced tax rate.
- In the case of so-called bundling offers, a decision must be made according to the general delimitation criteria (according to section 3.10 of the German VAT Guidelines) as to whether there is a uniform service or whether a division is required, which can then lead to different VAT rates. Whether or not a service performed electronically is subject to the reduced VAT rate cannot be inquired from the competent customs offices within the scope of a non-binding customs tariff information (uvZTA; the relevant reduced VAT rate in Germany is to some extent related to the customs tariff number which is why this point is often brought up).
- Access to databases containing various works may also be subject to the reduced VAT rate. This does not depend on whether access is purely online or via a physical data carrier. A database within the meaning of sec. 12 (2) no. 14 sentence 3 of the German VAT Act is a collection of works, data and other independent elements that are systematically or methodically arranged and individually accessible by electronic means. In order for access to this database to be subject to the reduced VAT rate, it must be characterized by the provision of "benefitted works". To the extent that databases predominantly contain non-benefited works or parts thereof, access to the database as a whole is not benefited. The distinction is to be made both quantitatively and qualitatively on the basis of the content contained (this distinction can certainly be a gray area).
It is questionable whether the cases of delimitation addressed in the decree actually shed enough light on the matter, in particular regarding the benefitting databases. According to the MOF, it is necessary for the database to contain a "large" number of electronic books, newspapers or magazines or parts thereof and thus be "primarily" characterized by the provision of beneficiary works within the meaning of § 12 (2) no. 14 sentence 1 of the German VAT Act. In this context, the assessment of access to the database is to be based on the "view of an average consumer", which is, however, unhelpful in many factual situations. Since databases that predominantly contain elements other than electronic books, newspapers or magazines, or parts thereof, are not eligible, the MoF's statements add a further difficulty. According to the MoF, the assessment of whether elements other than those eligible under sec. 12 (2) No. 14 Sentence 1 of the German VAT Act predominate, should be made "both quantitatively and qualitatively on the basis of the elements contained in the database". This is likely to lead to potential disputes, as a qualitative assessment leaves room for interpretation.
At least, the MoF has combined the publication of the administrative opinion with a generous non-objection rule for services performed after 17 December 2019, and before 1 January 2022, and for which the invoice was issued during this period.
