Well worth the VAT

That brings the VAT reduction

As of: 06/29/2020 9:27 a.m.
With daily shopping the savings remain small.

As part of the economic stimulus program in times of the corona pandemic, VAT will be reduced from 19 to 16 percent on July 1. For many groceries and other everyday items, a rate of 7 percent already applies, which has been reduced to 5 percent. It is questionable whether the benefit really reaches the end user, because retailers do not have to adjust their prices. You decide for yourself who benefits: dealers or customers.

Customers don't save three percent

If the seller passes the tax advantage on to customers, it is especially worthwhile for large purchases. For example, the price would decrease for:

  • a car from 30,000 to 29,243.70 euros - i.e. 756.30 euros
  • a sofa from 4,000 to 3,899.16 - around 100.84 euros
  • a smartphone from 500 to 487.39 - around 12.61 euros
  • a full tank of petrol from 60 to 58.49 - around 1.51 euros
  • a pair of stockings from 3 to 2.92 - by 0.08 euros

Since VAT is levied on the net price, the advantage of the reduction is not 3 percent of the previous retail price, but only exactly 2.52 percent. Example: An item that costs 100 euros net - without tax - costs 119 euros in the store with 19 percent VAT. In the future - with 16 percent VAT - only 116 euros: a minus of 3 euros. If the price of 119 euros were to drop by three percent, that would be 3.57 euros.

Less VAT on groceries

The advantage is even lower for most foods, as they are subject to the reduced VAT rate of 7 percent, which only drops by 2 points to 5 percent. For example, an item for 0.99 euros would cost 0.97 euros in the future, instead of 4.98 euros, 4.89 euros would be due. If you buy groceries for 60 euros, you can save 1.12 euros.

In the catering industry, the federal government had already reduced the VAT rate from 19 to 7 percent for a limited period. It now drops further to 5 percent. Price-linked goods such as magazines, books and prescription drugs are exempt from the tax cut.

The new price doesn't have to be on the shelf

Trade associations complain that marking the new prices and converting the tills is time-consuming and expensive. The Federal Ministry of Economics responded by stipulating that the prices do not have to be changed on every item or on the shelf. It is sufficient to reduce them overall at the checkout. The receipt must have the correct tax rate. Some companies announced price reductions as early as June.

There are calculators on the Internet that determine the benefit of the reduced VAT online.

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NDR Info | Info program | 06/29/2020 | 07:41 am