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German Federal Fiscal Court restricts input VAT deduction for luxury cars

In two decisions, the German Federal Fiscal Court clarifies and narrows down the allocation of ancillary and auxiliary transactions to a taxable activity using the example of the acquisition of so-called luxury vehicles by a taxable person with a different main activity. The acquisitions only fall within the taxable sphere and entitle the taxpayer to an input VAT deduction if the transaction, viewed in isolation, is an economic activity or if the taxable main activity is directly, permanently and necessarily expanded. In order to secure the input VAT deduction, it must henceforth be ensured that an economic connection to the main business activity can be justified.

Source: KMLZ

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