By reducing the VAT rate, national governments aim to stimulate demand in the expectation that the companies lower their prices. However, the corporations can also maintain the prices and benefit from a higher net profit. Therefore, the paper models the decision-making situation of a company that is confronted with a temporary VAT cut. The authors illustrate the influencing factors on a pass-through decision in a multi-period model by the use of the net present value method. The model is a theoretical explanatory approach to demonstrate why companies not always pass-through a temporary VAT reduction to consumers. Firms can draw direct conclusions from the results and transfer the findings to their decision-making process in the event of future VAT cuts. Furthermore, the model provides advice to fiscal policymakers concerning the effectiveness of temporary VAT reductions.