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Why (German) VAT experts do not have coffee “to go”
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Coffee or Latte Macchiato?

We all like to grab a coffee on the way to or from work, and we usually think little about any VAT implications involved in the hot drink which keeps us going. German fiscal authorities and courts, however, recently had to deal with Espresso, coffee, cappuccino, soy latte etc. on a number of cases, indicating that taxation law is finally going mad:

Under VAT aspects, the sale of ready-made drinks can either be a supply of goods or a service. A coffee purchased to “drink in” is considered a service, since it is actually served and cups and spoons are provided as well as seating areas. A coffee “to go” is considered a supply of goods since no service elements are involved.

Whilst the standard VAT rate of 19% is applied to all services, supplies of food and drinks may also qualify for the reduced rate of 7% (originally introduced to make essential food products cheaper for all consumers) if detailed in an appendix list to the German VAT Act. With regard to coffee, however, this list with its many references to customs tariff classifications turns out to be a bit tricky, as the choice of your favourite drink will show.

You like your coffee black? No reduced rate here, you will have to pay 19% VAT in any case.

You prefer your coffee with milk? The reduced rate applies to milk-mix drinks – but only if the milk proportion is at least 75%. How much milk goes into a cappuccino…? This does, by the way, also apply to ready-made coffee-milk products available in supermarket fridges. The milk proportion in these drinks, according to the product information, usually varies between 73 and 80 per cent…

Allergic to dairy? Why not go for a Soy Latte, only that in this case the soy milk is not considered milk because it is not dairy.  Under VAT aspects, this is a “normal” drink just like a black coffee, and the standard VAT rate applies.

petra-owen-aspxMaybe next time we buy a black coffee, a coffee with only a drop of milk, a Soy Cappuccino and a Latte Macchiato for our colleagues, instead of giving the barista nightmares about the application of the correct VAT rate, it might be a good idea to take our time, sit in a café, enjoy our drink and the service that comes with it and which makes (VAT) life so much easier….

By Petra Owen, Hansa Partner (Hamburg)


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