Disobeying VAT rules has stiff consequences

Thinking of using a value-added tax relief form to buy a house or buy your host nation landlord a nice gift? Think again. VAT relief doesn’t work like that.

People need to be aware of how to use VAT forms in order to avoid negative repercussions, said Rafael Wunsch, program manager and business consultant for Installation Management Command-Europe Region.

Relief from host nation VAT is not an entitlement of U.S. Forces members stationed in Europe — it’s a privilege granted by the host nation, Wunsch said.

“VAT relief is intended to provide individual tax relief for personal purchases for authorized personnel. It is not intended to help you purchase real estate or help you avoid paying taxes on gifts for non-authorized personnel,” Wunsch said.
Tax relief forms are not discount coupons, but important host nation tax documents, he added, and not following the rules will have consequences.

In addition to a loss of tax relief privileges, host nation authorities could file charges against individuals for tax evasion. Also, individuals could be required to pay unpaid taxes and fines.

Wunsch said the most common VAT misuse issues are:

• Splitting a purchase of more than €2,500 across multiple VAT forms instead of using the VAT form designed for purchases of more than €2,500 (NF-2)
• Conducting unauthorized repairs or replacements related to real estate
• Using VAT forms for telecommunication expenses or utilities
• Using a VAT form to buy a vehicle, then registering it in the German system
• Using VAT forms to make purchases for unauthorized personnel
• Following incorrect guidelines provided by vendors, or
• Placing an order with a vendor first, then coming to the VAT office for relief.
The solution to any potential conflict is to talk with the VAT Office or program management before the purchase, Wunsch said.

“Keep in mind that host nation rules require us to manage all VAT forms within a central database,” he added. “This database is designed to identify unusual buying behaviors and red-flag certain transactions for closer scrutiny.”

Individuals must turn in properly-filled-out white copies of VAT forms in a reasonable time after the purchase, Wunsch said. Also, individuals must turn in all VAT forms — used and unused — upon departure from Germany. Official guidelines for VAT use are found in Army Europe Regulation 215-6.

“Keep in mind that shoppers can use German VAT forms only with companies that report earnings in Germany,” said Wunsch, who added that vendors are not required to accept VAT forms.

In case German fiscal authorities deny a tax relief transaction, shoppers are responsible to pay the taxes.

For more information, visit your local VAT office.