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Current VAT Issues

Reduced tax rate poses a challenge to hotel businesses

Anke Bendschneider Anke Bendschneider

On 29 June 2020, the Bundestag and Bundesrat [German parliament] approved the temporary deduction of the VAT rate from 19% to 16% and from 7% to 5%. The reduction of the VAT rates entered into effect on 1 July 2020 and is valid temporarily until 31 December 2020. Together with the reduction of the VAT rate for restaurant and catering businesses adopted in early June as part of the COVID-19 Tax Relief Act, hotel owners and operators in particular are faced by a serious challenge. The questions arising in this connection are rather comprehensive and demanding can be derived from the 26-page application letter of the tax authorities published on 30 June 2020.

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