The temporary reduction in the VAT rates from 19 to 16 and from 7 to 5 percent respectively in the period 1 July 2020 to 31 December 2020 is an important element of the comprehensive stimulus package which was adopted on 3 June 2020. The aim of the Federal Ministry for Economic Affairs and Energy is that enterprises can pass on the reduction to consumers in a way that is as cost-effective and unbureacratic as possible.
The legal basis is the Price Indication Ordinance (PAngV), for which the Federal Ministry for Economic Affairs and Energy has the lead responsibility in the Federal Government. In order to temporarily reduce VAT rates, traders and providers of services can make use of the existing exemption pursuant to section 9 subsection 2 of the Ordinance and grant lump-sum discounts for example at the counters without changing price indications for all products during the night of 1 July 2020.
The Federal Ministry for Economic Affairs and Energy has informed the authorities of the Länder which are in charge of the implementation of the Price Indication Ordinance about this in a letter.
Use of the exemption possibility pursuant to section 9 subsection 2 of the Price Indication Ordinance cannot, however, be made for products that are subject to the price maintenance, including books, magazines, newspapers and prescription drugs as they are subject to different legal provisions. For these goods, price reductions by retailers are either not possible or subject to other provisions than those of the Price Indication Ordinance.