HEIDELBERG, Germany - Thinking of using a value added tax relief form to buy a house or maybe to buy your Host Nation landlord a nice gift. Wrong. VAT relief doesn't do that.
There are rules and regulations that govern how VAT relief can be used, and according to Rafael Wunsch, Program Manager and business consultant for Installation Management Command-Europe Region, individuals need to be aware of how to use VAT forms to avoid negative repercussions.
Wunsch explained that before a person attempts to use a VAT relief form, it is important the individual understands that tax relief from Host Nation value added tax for personal purchases is not an entitlement of U.S. Forces members stationed in Europe - it's a privilege granted by the Host Nation.
"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," said Wunsch. "It's important we use the tax forms as intended to avoid repercussions caused by misuse, such as loss of individual privileges."
For that reason, he said, it is important to know and to follow tax relief rules. Tax relief forms are not discount coupons, but they are important Host Nation tax documents, similar to a U.S. 1040 tax form.
Not following the rules will eventually have consequences, noted Wunsch.
In addition to loss of tax relief privileges, Wunsch explained that Host Nation fiscal authorities could file charges against individuals for tax evasion. Also, individuals could be required to pay unpaid taxes plus potential fines.
"General tax relief rules are fairly easy to understand and to follow," said Wunsch. "A couple key guidelines include not buying things for ineligible persons and not buying things for business purposes or resale."
He explained that, generally, items should be for individual use or for authorized personnel. Official guidelines are contained in Army in Europe Regulation 215-6. People may also seek information at local garrison VAT offices or from program management.
The most common issues individuals encounter, according to Wunsch, are:
Aca,!Ac Splitting an over 2500 Euro purchase across multiple VAT forms instead of using the special and required over 2500 Euro VAT form (NF-2) process.
Aca,!Ac Conducting unauthorized repairs or replacements related to real estate (replacement of heating systems, windows, doors, driveways, roofs, pipes, wiring, etc).
Aca,!Ac Using VAT forms for telecommunication expenses (cellular, Internet, etc) or utilities.
Aca,!Ac Using a VAT form to buy a vehicle and then registering it in the German system
Aca,!Ac Using VAT forms to make purchases for unauthorized personnel (e.g. German friends)
Aca,!Ac Following incorrect guidelines provided by vendors
Aca,!Ac Placing an order with a vendor first and then coming to the VAT office for relief (you must have the VAT form with you when placing the order or making the buy).
The solution to any potential conflict is to talk with the VAT office or program management prior to the purchase to ensure you use your VAT form correctly, said Wunsch, because forms are tracked and purchases are monitored.
"Keep in mind that Host Nation rules require us to manage all VAT forms within a central database. This database is designed to identify unusual buying behaviors and red-flag certain transactions for closer scrutiny," said Wunsch. "In addition, program management and U.S. forces customs personnel screen and spot-check transactions to monitor for abuse of the system. Suspected violations are reported to the appropriate law enforcement agency for follow-up."
There are some administrative requirements for VAT form users. Individuals must turn in properly filled out white copies of VAT forms in a reasonable time after the purchase, said Wunsch. Also, individuals must turn in all VAT forms -- used and unused -- upon departure from Germany.
"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.
"Ask the vendor before making a purchase or placing the order if VAT forms are accepted," he said. "Also, be aware that in case German fiscal authorities deny a tax relief transaction, you are responsible to pay the taxes (can be a few years after the transaction). That will for example occur if the receipt/purchase date falls outside the 'valid from' and the 'valid until' dates in field 3 of the VAT form."
Wunsch noted that Tax-Relief handouts with more information in English and German are available at VAT offices.
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