Deutsche Post will lose part of its long-standing VAT exemption status for business customerproducts and service as of January 2010, the German cabinet decided yesterday. Rivals welcomed the
move in principle but called for faster and tighter implementation.Under a draft law approved by the cabinet, there will be two main areas of changes regardingVAT in the postal sector that are designed to create a “level playing field” and bring Germany intoline with EU postal law.
From January 2010, DP would no longer be exempt from charging 19% VAT for various productstargeted mostly at business customers, including parcels with a weight of between 10kg and 20kg. Inaddition, DP would have to charge VAT on delivery of addressed heavy mail items such as books,catalogues, newspapers and magazines weighing more than 2kg. Express deliveries, receiver-payproducts and individually-agreed services would also be liable to VAT.
Delivery of letters up to 2kg, addressed parcels up to 10kg, and addressed heavy mail up to2kg will remain VAT-exempt. This effectively covers the consumer market for private letters andsmall parcels.
However, other postal companies will also be entitled to VAT exemption on these consumerproducts if they can demonstrate that they offer a nationwide universal postal service. “FromJanuary 1, 2010, all companies which offer certain postal services nationwide should be able toprofit from VAT exemption,” the German finance ministry said in a statement. Prices would have tobe approved by the German regulatory body Bundesnetzagentur.
Competitors have long complained they suffer a structural competitive price disadvantage of19% due to Deutsche Post’s VAT exemption for mail and parcels up to 20kg. The European Commissionhas started legal proceedings against Germany over the Deutsche Post VAT exemption on the groundsthat it presented an obstacle to free competition.
In response, TNT Post, the main challenger to Deutsche Post in the German mail market,welcomed the legal revision in principle since “the current VAT exemption for Deutsche Post iscontrary to EU law and impedes competition”. But it called for improvements to the draft bill sinceinexact phrasing open to various interpretations could enable Deutsche Post to maintain its VATexemption. There was no substantive reason for the long transitional period up to 1 January 2010,it added.
Mario Frusch, CEO of TNT Post Germany, commented: “The best solution would be a uniformsystem whereby all postal service providers would be required to charge the full VAT rate.Optionally, single consignments sent by private consumers – fewer than 50 items – could continue tobe exempt from VAT. The law must not leave any room for interpretation. It needs to be improved.Deutsche Post AG must not be given any scope for circumventing charging VAT on business mail.”
The German International Express Association (BIEK), in a statement released ahead of thecabinet approval, criticised the continued VAT exemption for parcels up to 10kg and the longtransition period.
