Adjustment of Input Tax Deduction when Switching from Flat-Rate Taxation to Standard Taxation (BFH)

• The taxpayer can adjust the input tax deduction when switching from the flat-rate taxation to the regular taxation.
• The taxpayer is disputing whether they can deduct input tax from invoices that were incurred in 2021 but will be used for transactions in 2022 when they have to switch to regular taxation.
• The Federal Fiscal Court (BFH) ruled that input tax can only be deducted in the amount of the VAT on the generated turnover in the disputed year.
• For agricultural operations, the tax and input tax are set at 10.7% of the taxable base in the disputed year.
• The input tax deduction is excluded for actual service acquisitions for agricultural operations under § 24 (1) sentence 4 UStG.
• If there is only one agricultural operation subject to flat-rate taxation in the year of service acquisition, the input service is allocated to this operation, resulting in input tax relief based on output turnover.
• The introduction of the total turnover limit of €600,000 does not change the assessment in the disputed year.
• In the case of a switch, the input tax deduction is initially excluded under § 24 (1) sentence 4 UStG and is then allowed after the switch to general taxation.
• This interpretation of § 24 UStG also meets the formal requirements associated with the switch to regular taxation.

Source: datenbank.nwb.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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