A number of credit institutions calculate their deductible proportion of input VAT using the so-called Philipowski method. Recently, the Munich Tax Court found this method of calculating the deductible proportion of input VAT not to be appropriate. The Federal Fiscal Court has now confirmed this decision. Nevertheless, the following still applies: Every taxable person with partly taxable and partly VAT exempt output transactions can estimate its own deductible proportion of input VAT. If this estimate is appropriate, the tax authorities must accept it.
Source: IVA
