Automotive trade fears new bureaucratic monster

According to the German Automobile Industry Association (ZDK), the automotive trade is facing new bureaucratic burdens. As of July 1, warranty commitments made by car dealers to vehicle buyers will be treated differently than before. The association fears devastating consequences.

This article is part of the special feature on bureaucratic madness in the skilled trades.

According to the German Association of the Automotive Industry (ZDK), warranty commitments made by car dealers to vehicle buyers are to be treated fundamentally differently under insurance and sales tax law than before. The association fears devastating consequences with significant additional bureaucratic burdens for businesses.

The German Association of Motor Trades and Repairs (ZDK) has received a letter from the Federal Ministry of Finance to the highest tax authorities of the federal states, which refers to a two-and-a-half-year-old ruling by the Federal Fiscal Court from November 14, 2018. According to this ruling, dealers who issue warranty commitments to car buyers are to be classified as insurers for tax purposes by order of the Ministry of Finance.

Unreasonable additional effort

If in doubt, dealers should register with the Federal Central Tax Office , declare and pay insurance tax monthly , comply with special record-keeping obligations and issue separate invoices for the warranty commitments.

DHB now also available digitally! Simply click here and register for the digital DHB! "This additional bureaucratic burden alone is unreasonable for the automotive trade, which is already facing immense pressure due to the months-long lockdown caused by the coronavirus, and cannot be managed within the short timeframe until June 30, 2021 ," emphasizes ZDK Vice President Thomas Peckruhn.

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Fears of worsening trade situation

Even more financially threatening is the fact that, due to the future insurance tax-liable but VAT-exempt warranty commitments, the dealer's input tax deduction from input services (spare parts, overhead costs) would no longer be possible – from the ZDK's point of view, a massive economic disadvantage for the trade.

The dealer must also determine or introduce a new input tax key for overhead costs. The German Association of Motor Trades and Repairs (ZDK) argues that, particularly due to the short-term nature of these changes , significant correction efforts, frequent repayments, and in some cases even de facto double taxation with insurance and sales tax are almost unavoidable.

Letter to the Minister of Finance

The German Association of Motor Trades and Repairs (ZDK) has therefore written to Federal Finance Minister Olaf Scholz , pointing out the consequences of this directive for the automotive trade. Peckruhn is urging the minister to extend the deadline granted to the federal states by at least twelve months. As a second step, a solution that meets the needs of businesses and their customers and, above all, is practically feasible should then be developed with the participation of the affected sectors.

Source: ZDK