The Supreme Court of Germany released the decision regarding the input tax claim appeal for retail sales

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The Supreme Court of Germany for tax and customs/excise duty matters has released the court decision that explains input tax deduction rules for a retail sales agreement. 




The taxpayer works to promote medium-sized retail companies in various industries where he is a registered cooperative. The input tax deduction was claimed on the issued sales invoice by one of the cooperative members of his new branch where the taxpayer was also providing funds. However, the tax office rejected the deduction, claiming that the payment was a non-taxable grant. 



The court allowed the deduction during the appeal, because:  


  1. There was a direct connection between the payments and the use of the sales area by the member and the taxpayer; and  
  2. The payment was made as part of an exchange of services. 




If you have received an invoice (or a service) with VAT, you may deduct input tax. However, there are also factors that makes deduction impossible. These includes: 


  • The item is used for a private use, not commercial 
  • VAT exempt sales 
  • Invoice is incorrect and fails to meet the requirements 
  • Non-deductible expenses (e.g., office rent) 




  • Is German VAT received in the invoice? 
  • For which period should the input tax be declared and deducted? 
  • Is invoice correction required from my supplier? 



You should be able to take the appropriate measures to ensure your right for input VAT deduction in the applicable VAT period based on the answers to these questions.  



Source: Federal Finance Court Germany, VR 22/18 


NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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