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In Germany, the VAT reverse charge mechanism applies to work supplies by a non-established taxable person to another taxable person, even if that operation actually qualifies as a supply of goods from a German VAT perspective. There is however a distinction to be made between such work supplies (“Werklieferungen”) and assembly deliveries (“Montagelieferungen”), although both operations include an installation and are therefore deemed to take place in Germany from a VAT perspective.

On 1 October 2020, the German Authorities issued clarifications in that respect, implying clearer definitions of these concepts.

According to the German Tax Authorities, a work supply shall be deemed to have been performed if the supplier processes goods which do not belong to him and also uses goods procured by himself for this purpose. It means that, if the supplier only processes his own goods, the operation rather qualifies an assembly delivery.

The reverse charge however applies to work supplies (“Werklieferungen”) only !!!

If a non-established supplier performs an assembly delivery (“Montagelieferung”) in Germany, e.g. the supply of an equipment that is installed in the premises of the customer, that supplier must register for VAT in Germany and charge German VAT! This is new because such operations used to be regarded as work supplies subject to the reverse charge.

(Source: Letter of Bundesministerium der Finanzen dated 1 October 2020)