Where VAT has been overcharged to a customer, the Federal Ministry of Finance has issued a decree on 7 October that it must be refunded to the customer before it is repaid by the tax authorities to the business. Merely crediting the VAT in the business records is not sufficient, even if there is an agreement to repay the customer in the future.
This decree appears to follow the case V R 56/06. Following the recent CJEU ruling in Mapfre Warranty Case C-584/13 (see FiscalPress August 2015), it is possible that in some cases companies may have to repay 19% VAT to a customer and then try to recover 19% IPT from the same customer. This depends on whether VAT has been charged on warranties or not, and the contractual and legal position concerning IPT. In principle, according to the German IPT Act, the IPT is included in the premium paid by the policy holder, whether it was invoiced separately/directly or not. Therefore, if it is not possible to recharacterise the VAT as IPT, the VAT may need to be repaid to the customer but the warranty provider might also have to fund IPT out of the net proceeds.