VAT Adjustment

Key Points at a Glance:

• In early June 2020, the German federal government decided on a stimulus package to boost the economy after the COVID-19-related lockdown. A key component of the support package for Germany is the reduction of VAT.
• The tax reduction results in a price advantage that we pass on to you in the form of a voucher. This will be applied to the gross value of the shopping cart after the order is placed. Since the prices displayed in the online shop remain unchanged, you will only see the actual price reduction in the shopping cart through the application of our "Corona stimulus package" voucher.

Due to the measures taken to combat the coronavirus pandemic, the global economy has significantly declined, presenting major challenges for Germany as well. To get the economy moving again after the lockdown, the German federal government has recently introduced a stimulus package. Measures such as tax relief are intended to help citizens and businesses overcome the crisis and strengthen their future viability. The goal is to preserve jobs and prevent social and financial hardship.

A core aspect of the support package, which was approved by the federal cabinet on June 3, 2020, is the temporary reduction of VAT. This will take effect on July 1, 2020, and will initially apply until December 31, 2020. What this means for us as a company and for you as consumers is summarized below.

What Changes Are Planned?

The reduction in new infections due to strict social distancing measures was a major success. Now, the aim is to minimize the economic impact as much as possible. 

Demand and consumption of goods and services are essential for a functioning economy. Therefore, as part of the stimulus and crisis management package, VAT will be temporarily reduced from 19% to 16% and from 7% to 5% for half a year to make purchasing decisions more attractive. The government hopes that tax reductions and the resulting price cuts will encourage more purchases that might otherwise have been made next year.

VAT or Sales Tax? What's the Difference?
The correct legal term for VAT is actually "sales tax." However, the term "VAT" is more common and is derived from the form of taxation known as the value-added principle. A company pays a tax levied on the sale of goods and services. It is typically 19%, but for certain categories of products and services considered essential for human needs, a reduced rate of 7% applies. This also includes our dietary supplements.

How Will It Be Implemented?

The Federal Ministry for Economic Affairs and Energy, which is responsible for the Price Indication Ordinance (PAngV) in the federal government, has allowed companies to use an exception. Price reductions can be implemented through so-called flat-rate discounts during the period of the temporary tax reduction. The decision on whether to pass on the tax cut to customers remains with the company.

What Will Change in Our BioProphyl Online Shop?

We have decided to pass on the tax reduction to you in the form of an immediate discount, which will be applied to the gross value of your shopping cart after the order is placed. 

The gross price (our RRP) is calculated by adding the applicable tax rate to the net price. If this tax rate decreases, the gross price also decreases. 

Take, for example, our Vitamin B Complex: The net price is €30.79. With a tax rate of 7%, the gross price listed in our online shop is €32.95. Based on the new, reduced tax rate of 5%, the gross price drops to €32.33. The difference between the old and new gross amounts is 1.869%. We therefore apply a 1.869% discount to the RRP listed in the online shop to reflect the price advantage resulting from the tax reduction and avoid a hidden price increase in the form of a higher net price. 

This may sound confusing at first, but it's actually not that complicated. Below, we've illustrated the calculation for you:

Our RRP prices displayed in the shop remain unchanged for three reasons:

1. The technical implementation of the changed tax rates in our inventory management system and accounting software is very complex and not worth the effort given the short duration of the decision. Instead, we are focusing our energy on "more important" things like optimizing the user-friendliness of our website or developing new products.
2. Our current catalogs and promotional materials have already been printed, so a retroactive price adjustment is no longer possible.
3. As an online retailer, we compete with many other companies across the European Union. To reflect the stimulus package, we have kept our prices the same for our German customers and are offering them the flat-rate discount described above until December 31, 2020.

You will only see the actual price reduction in the shopping cart through the application of our "Corona stimulus package" voucher, as shown in the example. If you have any further questions, please feel free to contact us at any time – by phone at 02656 / 952 380 or by email at [email protected].