- The German tax authorities have issued a new letter clarifying the rules for the allocation of input tax based on turnover.
- If a business uses services for both deductible and non-deductible purposes, the input tax must be allocated.
- The allocation can be based on turnover if no other method is available, but EU regulations must also be considered.
- The tax authorities have previously provided guidance on input tax allocation for real estate and special cases.
- The new letter clarifies the rules for allocation based on turnover, following a 2016 ruling by the European Court of Justice.
- The letter also explains that input tax allocation based on total turnover must be rounded to the nearest whole percentage, unless a more precise method is allowed.
- The letter supplements existing guidelines on input tax allocation in the German VAT guidelines.
Source: haufe.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.
