Free Wood Chip Drying Not Taxable, But Affects Input Tax Deduction: German Court Ruling

• The court ruling from December 11, 2024, addresses the non-taxability of free drying of wood chips for obtaining a KWK bonus but considers it detrimental to input tax deduction.
• The case was handled by the Federal Fiscal Court, XI Senate.
• The ruling references various sections of the German VAT Act and European directives.
• The case was previously judged by the Finance Court of Mecklenburg-Vorpommern on February 27, 2023.
• Key points include the non-taxability of free heat supply when drying wood chips for a related company to gain a KWK bonus.
• The free drying service is not considered a taxable supply as it is not performed for purposes outside the company.
• Input tax deduction is excluded for non-economic activities related to free wood drying.
• Incorrect input tax deductions must be corrected in subsequent years if the original tax assessment year cannot be changed.
• The Federal Fiscal Court overturned the previous ruling and remanded the case for further proceedings.
• The plaintiff operated a biogas plant with a combined heat and power unit since 2012, receiving a KWK bonus for electricity fed into the grid.

Source: bundesfinanzhof.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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