- The German Federal Fiscal Court held that input VAT is deductible on advisory costs incurred to enforce damages claims arising from an intended economic activity, even if that activity was never ultimately carried on.
- The Court treated the legal/advisory fees as general overheads of the intended taxable activity, creating the required direct and immediate link for input VAT deduction under Section 15(1) UStG and Article 168(a) of the VAT Directive.
- The ruling confirms that the decisive factor is the origin of the claim in a contemplated economic activity, not whether the underlying project actually commenced or was completed.
- This provides important guidance for project termination and contract structuring: winding-up and claim-enforcement costs may still support input VAT recovery where tied to the intended business activity.
Source: assets.kpmg.com
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.
