BMF Clarifies VAT Deduction Rules for Permanently Loss-Making Institutions: Two-Step Assessment Required

• The BMF clarified rules for input VAT deduction for permanently loss-making entities.
• Two-step assessment is required: (1) whether there is a supply of services for consideration, and (2) whether an economic activity exists.
• A supply for consideration exists if there is a direct link between payment and service, even if the payment is below cost, unless the payment is merely symbolic.
• Economic activity requires a sustainable intention to generate income; a significant mismatch between costs and income (cost coverage below 3%) indicates no economic activity.
• Subsidies must be deducted from costs when assessing cost coverage for each activity.

Source: nwb-experten-blog.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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