Input VAT Deduction Pre-Transition to Standard Taxation or SME regulation

Input VAT deduction from a supply of services before the entrepreneur’s transition to standard taxation or small business regulation according to § 19 of the Value Added Tax Act (UStG)

• No Input VAT Deduction Before Transition:
  If an entrepreneur receives services before switching from the small business regulation (§ 19 UStG) to standard taxation, input VAT deduction is not allowed for periods before the transition—even if the services are intended for taxable transactions after the switch. This also applies to advance or down payment invoices.
• Adjustment Upon Transition (Section 15a UStG):
  The actual transition to standard taxation is considered a change in circumstances. Input VAT can only be adjusted in favor of the entrepreneur under the conditions of § 15a UStG and within the de minimis limits of § 44 UStDV. Conversely, switching back to small business regulation may require a correction to the entrepreneur’s detriment.
• Application and Transitional Rules:
  The new principles apply to all open cases. However, it is not objected if, in VAT returns submitted up to November 10, 2025, entrepreneurs refer to the previous version of the application decree. Necessary corrections can be made in VAT returns for later years.

Source BMF

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