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Germany: Input VAT deduction following an audit

Germany: Input VAT deduction following an audit

The Court of Justice of the European Union (CJEU) issued a judgment concluding that the principles of effectiveness, neutrality, and proportionality preclude a national regulation that denies a business the ability to make a correction in order to assert a right (not yet lapsed) to deduct input value added tax (VAT), merely because the correction relates to a period of time that has already been audited.

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The case is: Zabrus C-81/17 (26 April 2018)

KPMG observation

The CJEU judgment has potential implications for German law (see § 173 German tax law (AO)). The CJEU judgment could be interpreted to mean that while an assessment deadline may be allowed for retroactively claimed input VAT deductions (such as under § 169 AO), if the deadline has not yet lapsed, an input VAT deduction can only be refused in situations when there is fraud or claims of injury to the state fisc. Looked at in this respect, the provisions of § 173 AO would be in violation of EU law because they either do not serve this purpose or are disproportionate when compared to a financial penalty. It remains to be seen which conclusions the tax authorities and the tax courts will draw from this CJEU judgment.

Other VAT developments

Other recent VAT developments that may affect businesses in Germany include the following:

  • Intra-Community triangular transactions (CJEU judgment, C-580/16 (19 April 2018) – Firma Hans Bühler)
  • Deadline for input VAT deduction when an invoice is corrected (CJEU judgment, case C-8/17 (12 April 2018) – Biosafe)
  • Input VAT deduction arising from the dissolution of a long-term lease agreement (BFH decision of 13 December 2017 – XI R 3/16)
  • Tax authority suspends “chips decree” (BMF guidance of 23 April 2018 ‒ III C 3 ‒ S 7103-a/17/10001)
  • Input travel services from another EU Member State (BFH decision of 13 December 2017 – XI R 4/16)
  • Non-redemption of reward points (Münster Lower Tax Court decision of 14 November 2017, 15 K 281/14 U; BFH ref. no.: V R 64/17)

 

Read a May 2018 report [PDF 329 KB] prepared by the KPMG member firm in Germany

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