As part of its economic stimulus and crisis management package, the government coalition announced that it would reduce the sales tax rate from July 1, 2020 to December 31, 2020 from 19 percent to 16 percent and from seven percent to five percent. This means that entrepreneurs in Germany suddenly have a lot of work to do. But what exactly needs to be done now?
Stefan Genth, general manager of the German trade association, said according to ZDF the German Press Agency that the effort is comparatively high. In fact, it’s about more than just changing cash register systems, replacing price tags or revising invoice templates. Any updates for accounting systems and other software solutions such as shop systems, ERP systems and procurement platforms must be installed as soon as they are available and the settings cannot be made yourself.
Sales tax is a complex topic
The topic of converting VAT is complex. In principle, entrepreneurs must first decide whether they want to adjust the gross or net prices for their products and services. This is not easy in all cases, as careful consideration should be given to the risk that an increase in the net price will have a negative impact on customer relationships and the effort involved in switching over twice (on July 1, 2020 and on January 1, 2021). In addition, purchasing behavior must be taken into account. Online retailers are already complaining that customers are returning ordered goods in the hope of getting them cheaper after the sales tax reduction.
Furthermore, the software must be adapted. This process, in turn, could be particularly problematic for entrepreneurs who work with self-programmed applications or solutions that do not have functions for setting the applicable sales tax rate and for which there is no support. You should now opt for an up-to-date system like a well-maintained one Accounting software decide. The advantage: The providers proactively communicate how customers can implement the changes, see e.g. B. in Blog post by FastBill and also have interfaces to other products. This also includes our GetMyInvoices solution, which automatically retrieves invoices and other documents from thousands of sources and ensures that they are automatically archived and/or forwarded to the tax advisor. This saves users valuable time that they need for many other things right now.
Resources for other tasks
Many entrepreneurs now have to redesign advertising on which they have stated prices. It is also important to change when checking incoming and outgoing invoices and to ensure that the new sales tax rate is noted and stated correctly. Incorrect invoices should be rejected and a correction requested. Anyone whose bookkeeping goes beyond simple incoming and outgoing invoices, for example because they also use or offer leasing and/or rental agreements, has a lot more work to do. He must ensure a correction or check whether the provider will take care of it. Anyone dealing with down payments, subscription models and vouchers must also find out in detail how to correctly implement the temporary change in their case. It is particularly advisable for companies with more complex billing models to consult their tax advisor. This not only provides security, but also saves time and nerves. Because corrections are time-consuming and cost-intensive.
By the way: Our prices do not include sales tax. This means that you benefit 1:1 from the sales tax reduction.
