No “Cake Tax”: Exceptions to Sales Tax for the Public Sector

• The current taxation of the public sector needs to be adjusted due to European regulations.
• New regulations were enacted in 2015 with generous transitional provisions, but these will expire on January 1, 2025.
• The core of the new regulation is to eliminate the inequality in taxation between the public sector and other market participants.
• The issue arises when schools and similar institutions generate income through the sale of food or the organization of events, creating competition with other providers.
• The solution proposed by the tax authorities in NRW, Baden-Württemberg, and Bayern is to attribute these activities to individual groups of parents and/or students, rather than the schools themselves.
• This avoids the administrative challenges for schools and parent/student initiatives.
• The Bavarian State Office for Taxes warns that certain situations could still lead to taxable services in the context of schools and institutions.
• It is important to ensure that the target audience of each event is limited to the respective institution.
• The services should not be repeatedly provided by the same participants to avoid the perception of sustainability in the market.
• The turnover limits of the small business regulation should not be exceeded.
• Individual cases may require deviation from the general recommendations.

Source: awb-international.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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