Mr. E. designed his new house to include a home office, and was therefore partly using the house for a business purpose (a mixed-use asset) and was entitled to some input tax recovery.
However, he only notified the German tax authorities that he was adopting this treatment in his annual VAT declaration for 2015, which he submitted after the 31 May deadline for declaring the business use of mixed-use assets required by German law.
In the CJEU’s judgment, the requirement for a declaration was a formal rather than a substantive requirement for VAT recovery, and E should be allowed to demonstrate his decision to use part of the house for business purposes. However, this right did not exist indefinitely, and Germany was allowed to impose time limits on E. The court was satisfied that the time limit in this case satisfied the principles of equivalence and effectiveness, although it was left to the national court to determine whether input tax denial was proportionate, or whether an administrative penalty would have been a more appropriate response to E’s tardiness.
See also ECJ C-45/20 and C-46/20 (Finanzamt N) – Decision – Input VAT, allocation of mixed used purchases to the business