No sales tax applies on your sale of receivables.

In the German tax law relating to the sale of receivables, a distinction is made between distressed and non-distressed receivables. According to the tax authorities, a receivable is regarded as distressed, if, insofar as it is due, it has not been settled in full, or has only been settled to a minimal amount, for more than 90 days. A receivable is also distressed if the contractual arrangement has been terminated or the conditions for termination exist. In the banking sector distressed receivables are also referred to as non-performing loans (NPL). If these circumstances do not apply to the default the receivables are called non-distressed receivables or performing loans (PL).

Factoring providers, also known as factors, specialize in buying non-distressed/performing receivables to then recover them for their clients. This allows factoring clients to quickly turn outstanding but not overdue invoices into cash flow. In return, the factor levies a commission at a rate of around three percent of the invoice amount. Factoring is therefore a service in nature and for this reason is subject to sales tax.

Traditional receivables purchasing, on the other hand, is about the purchase of distressed receivables, for example through a debt collection company like EOS. The purchase price is determined on the basis of the nominal value of the receivables less a risk premium. The seller transfers the overdue invoices and loans to the buyer in their entirety, and in return receives the agreed liquid funds. Under taxation law, the sale of distressed receivables is exempt from sales tax from the perspective of the seller.

For more information please go to: What is the sale of receivables?