German temporary VAT cuts from today to 31st Dec 2020

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Boris is saying ‘Build! Build! Build!’ to get the country’s economy going again after the pandemic and in very Labouresque style banished all thoughts of austerity, as he throws caution to the winds, aiming to spend our way to prosperity. Quite how much money will be spent while the nation is still racking up billions in coronavirus costs remains to be seen until Rishi Sunak makes his statement next week to share his plan for paying down the debt. One thing that’s widely expected however will be temporary VAT cuts.

Germany has already announced temporary VAT cuts as a way to get consumers spending again and they kick in today.

German temporary VAT cuts

  • 19% to 16% (regular VAT
  • 7% to 5% (reduced VAT rate)
  • 1st July 2020 – 31st December 2020

Time to lower your prices?

The aim of temporary VAT cuts are that retailers pass the cuts onto consumers. For marketplace sellers this mean adjusting your pricing but of course that’s not always easy unless you have separate listings on German marketplaces. If you have listings which have visibility in Germany then there may not be much you can do, but if you have different pricing rules for different countries then you may want to adjust your formulae to edge German prices down by 3%.

Of course you may decide not to reduce your prices and pocket the additional margin, but this tactic could quickly mean that you’re uncompetitive. If you are a UK merchant, you could potentially ignore the German temporary VAT cuts however if the UK acts in a similar matter and the Chancellor cuts VAT then you will want to act if the UK is your primary market.

Regardless of whether you lower your prices, you will need to ensure you take into account any temporary VAT cuts when completing VAT returns for the countries you are registered in.

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