Germany MOF Clarifies Input VAT Deductions for Subsidized Service Providers Operating at Persistent Loss

The German Ministry of Finance Jan. 20 posted BMF Letter No. COO.7005.100.4.13831037, clarifying input VAT deductions for service providers operating at a persistent loss while receiving public subsidies. Topics covered include: 1) the lack of entitlement for such service providers operating at a persistent loss to deduct input VAT when the input services are unrelated to taxable activity; 2) the two-step test to establish whether such service providers are eligible for input VAT deductions, including determining if there is a direct link between remuneration and performance, and the existence of economic activity; 3) the amendment of the VAT Application Decree ...