On 24 September 2012 the German Ministry of Finance issued a decree (only available in German language) implementing the principles of the ECJ decision in the “Lebara” case. You can read more of this case here, here and here.
Each sale of single purpose prepaid cards is regarded as a telecommunication service if these cards are sold in the supplier’s own name. Otherwise, if the sale is made in the name of a third person, an intermediary service is on hand. Whether there is a telecommunication service or an intermediary service should be considered on each distribution level.
A single purpose prepaid card in the sense of the decree requires that it can exclusively be used for telephone calls by means of the provided infrastructure, and that it contains all information necessary to make calls.
The tax point is when the purchaser is in a position to use the telecommunication services – this is the time when VAT needs to be charged. The time at which telephone calls are actually made (and if they are made at all) is irrelevant.
The decree is generally applicable for all assessments which are still subject to amendment; there is however a clause that suppliers may refer to a certain earlier decree for all such card sales performed before 1 January 2013.
How is this different from the current/past treatment?
In an earlier decree of the German Ministry of Finance issued in 2001 the position was as follows with respect to single purpose prepaid cards (which were not sold together with a starter package):
At the time when the card was activated the amount received by the supplier (network operator or service provider = provider of telecommunication services who does not have an own network but who acquires calling periods from the network operators) had to be taxed as a payment on account and the following calls undertaken by the end consumer were considered as supplies taxable with VAT.
In case that retailer was engaged in the sale of the cards, the retailer did in general not supply a telecommunication service to the end customer. The difference between the paid and received amount was regarded to be a commission for the procurement of the exchange of one payment instrument (cash) against another payment instrument (electronic money) which embodied the right to receive telecommunication services.
What does this mean for you?
If your are involved into the sales of prepaid telecom cards in Germany then you should review if your VAT treatment is compliant with the above position of the German tax authorities and adjust it accordingly if required.
It is a good idea to do this check in all EU countries. If nothing else the position of the German tax authorities is compliant with the position of the UK tax authorities. This (together with the understanding of the judgement in the Lebara case) provides a very good indication on the probable position of the tax authorities in the rest of the EU.
Just remember that this position will probably not be automatically applied in all cases of SPVs in all the various EU countries.