As a result of Brexit, a number of UK financial service providers have relocated their business activities to Germany, including trading and clearing transactions in securities and derivatives. As a consequence, discussions have increasingly arisen as to how services that are processed via exchanges and other trading platforms are to be treated for German VAT purposes. So far, there has been no explicit regulation and therefore the German market and accounting practice have been inconsistent. In particular, matching, clearing and settlement services are in part considered to be taxable, whereas similar services in the UK are generally treated as VAT exempt. Since such transactions are linked to the VAT exempt trading with securities and therefore input VAT deduction is not allowed, trade participants are facing significant cost factor in the German market. Moreover, as trade participants based in Germany receive comparable services from exchanges and trading platforms based abroad, the differentiation between exempt and taxable services becomes relevant, as it needs to be assessed whether the reverse charge procedure is applicable.
Source EY
