Germany MOF Releases Court Decision Clarifying VAT Deduction Rules for Input Services

The German Ministry of Finance May 9 released Tax Court Decision No. XI R 13/19, clarifying VAT deduction rules for the purchase of input services. A German investment company provided input services to clients by managing real estate funds. The taxpayer claimed input tax deductions, which the tax agency disallowed. On appeal, the tax court rejected the taxpayer’s claim, explaining that: 1) VAT paid for input services isn’t deductible if the expenses are part of VAT-exempt management services; and 2) the taxpayer failed to fulfill the legal requirements to claim the input VAT deduction. [Germany, Ministry of Finance, 05/09/22]

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