VAT in times of COVID-19 – Fast-track reduction of VAT – No excess input VAT deduction in case of VAT reduction

No excess input VAT deduction in case of VAT reduction:

Under German VAT law, the right to deduct input VAT is limited to the statutory VAT amount (temporarily the amount based on lower VAT rate – 16%/5%). In consequence, even a business customer who has the right to deduct input VAT in full, will still not be entitled to claim the excess VAT incorrectly invoiced by the supplier (e.g. with a 19%-invoice issued in August incorrectly for a supply legally rendered in July under 16% VAT). This in mind, business customers need to consider the lower VAT rates in invoice reviews. If excess VAT has been paid to a supplier, the customer might have a (contractual) claim for repayment against the supplier (subject to underlying contractual arrangements and the rules under the applicable civil laws – possibly also considering contractual ‘choice of law’ clauses).

Source Baker & McKenzie

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