June 23, 2024


The Legal System

The Taxation Processes in Banking Transactions

There are banking transactions that are subject to VAT. This can include, for example, custody fees in the securities area or the rental of safe deposit boxes. Questions about sales tax reductions are fundamentally the business policy responsibility of each individual institute. In case of doubt, only your savings bank can tell you whether a certain service is subject to the VAT reduction or not.

What discounts can taxes customers receive?

Since most of the services provided by savings banks and banks that are subject to VAT are long-term contracts, the structure described therein applies. But it can be cheap for customers and turn the half-yearly discount into a year-round one.

If, for example, an annual payment is agreed for the rented locker or the custody account, which is in the second half of the year (e.g. on December 31, 2020), the reduced VAT rate would apply to the annual invoice. If the payment is regulated on a monthly or quarterly basis, the reduction applies accordingly for the period stipulated by law from July 1 to December 31, 2020 and all invoices due during this period. As a part of the online tax services this is important.

Will the tax cut stimulate the economy?

The VAT cut is part of the federal government’s economic stimulus package. A boost to the economy is therefore the clearly stated goal. Critics calculate the advantages on a small scale: a kilo of bananas would go from 1.69 euros to 1.65 euros cheaper.

  • Proponents such as the German Institute for Economic Research (DIW) have calculated relief of more than 22 billion euros for consumers. Of course, this only applies if one hundred percent of the VAT cut is passed on to consumers. But the economic researchers have one more argument. A VAT cut helps lower incomes more than the wealthy in the country.
  • VAT is a very important source of income for the state. The buyer must pay sales tax on every purchase. This is usually already included in the purchase price. You pay it to the seller when you buy a product or service, who then has to pay the tax to the tax office.
  • In some countries (e.g. in the USA) the sales prices are always written without VAT, the buyer has to calculate the amount of the VAT himself, because the VAT is only added at the checkout.


The sales price excluding VAT is called the net sales price. Products and services are taxed with different VAT rates in all countries of the world. In addition, there is often a normal tax rate and a reduced tax rate for certain products (important to the state).