On 7 November 2007, the regulatory authority announced a benchmark decision specifying the conditions that apply from 2008 until the end of 2011 to regulation under the price cap procedure for mail prices requiring approval. This stipulates the key factors applicable to mail prices as being the general rate of inflation and the expected productivity growth rate for Deutsche Post AG. Prices have to be lowered if the inflation rate in the reference period is less than the productivity growth rate specified by the regulatory authority. Mail prices requiring approval remain largely unchanged in 2009. The regulatory authority accepted an application from Deutsche Post AG to this effect on 13 October 2008.
The third EU Postal Directive came into force on 27 February 2008. The Directive requires most EU member states to open up their markets by 2011, although the nine most recent members plus Greece and Luxembourg have an option to delay opening their markets until 2013. Until then, the previous limits continue to apply across the EU, with reservable services restricted to a maximum of 50 grams or two-and-a-half times the standard letter price. It is now possible to plan with certainty for the future regarding the date by which all national monopolies in Europe must fall.
Whilst liberalisation of postal markets poses risks for Deutsche Post AG due to increased competition in Germany, it also opens up new opportunities in other European postal markets. In 2008, cross-border mail in Europe between Deutsche Post AG and 14 other Western European postal operators was governed by the REIMS III agreement and with another eight Eastern European postal companies by the REIMS EAST agreement. REIMS III is the successor to REIMS II and came into force retroactively from 1 January 2008.
Discussions continue regarding the extent to which postal services should be exempt from value-added tax (VAT). An amendment to the Umsatzsteuergesetz (German value-added tax act) currently in preparation will reduce the VAT exemption for Deutsche Post AG. A bill to this effect was adopted by the German cabinet on 24 September 2008 and is set to become law on 1 January 2010. Under the new rules, a VAT exemption will only apply to specific universal services pursuant to the EU Postal Directive that are not subject to individual agreement or provided on special terms, for example, at discount rates. The VAT exemption is to apply to any enterprise providing all of these services nationwide in Germany. The German legislative process may be affected by a European Court of Justice (ECJ) decision expected for the second quarter of 2009. On 15 January 2009, the ECJ Advocate General delivered her opinion in the case concerned, which relates to the VAT exemption for postal services in the United Kingdom. The German bill has yet to be passed by the Bundestag and Bundesrat.
Concurring with Deutsche Post AG, the regulatory authority considers that the prices it approved are net prices not including VAT. VAT could therefore be added to the approved prices. However, it cannot be ruled out that the application of VAT would lead to a decrease in revenue and earnings.
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