Corrected or Late Invoices? BFH Confirms VAT Recovery Still Possible

The Federal Fiscal Court (Bundesfinanzhof, BFH) recently ruled on a case involving a UK-based company engaged in global trading of raw materials. In 2018, the company carried out a single taxable transaction in Germany, selling liquefied petroleum gas (LPG). Initially, the supplier issued an invoice without VAT, mistakenly assuming that tax warehouse rules applied. A corrected invoice including VAT was issued in January 2019.

The company sought to deduct input VAT for 2018 and also filed a VAT return for January 2019. The tax office rejected both claims, arguing that the corrected invoice does not retroactively create the right to deduct VAT.

Key Legal Issue

The central question was: When does the right to deduct input VAT arise if the invoice is corrected later?
Does the corrected invoice retroactively apply to the original transaction date, or only from the date of correction?

Court’s Decision

The BFH clarified two important principles:

1. Timing of the Right to Deduct VAT
   The right to deduct input VAT arises when the taxable transaction occurs, provided the taxpayer was subject to the general taxation procedure at that time. In this case, the right arose in 2018 because the company had domestic transactions then.
2. Effect of a Corrected Invoice
   A corrected invoice does not retroactively create the right to deduct VAT. The deduction can only be claimed when the corrected invoice is issued. This distinguishes the situation from retroactive invoice corrections under certain EU VAT rules.

The BFH partially overturned the lower court’s decision and referred the case back for further proceedings.

Implications for Businesses

• Foreign companies with occasional domestic transactions should note that they cannot be forced into the VAT refund procedure if they were subject to general taxation at the time of the transaction.
• Invoice corrections do not retroactively change the period for VAT deduction. Businesses must claim the deduction in the period when the corrected invoice is received.
• Compliance tip: Ensure invoices are accurate at the time of issuance to avoid timing issues with VAT deductions.

Practical Takeaways

• Always verify VAT treatment before issuing invoices.
• If an invoice is corrected later, plan for the deduction in the correct period (date of correction).
• Keep documentation to prove the timing of transactions and invoice corrections.

Source BFH