BFH Clarifies VAT Deduction Rules for Insolvency Administrators in Business Continuation and Cessation Cases

The BFH has made several rulings on VAT issues in insolvency cases.
Differentiation is required between business continuation and cessation by the insolvency administrator for VAT deduction assessment.
In a ruling from 23 October 2024, the BFH clarified that VAT from insolvency administrator services must be split if used for both business and private insolvency liabilities.
If the business is continued without significant liquidation actions, VAT allocation is based on the debtor’s overall activities during insolvency administration.
Business continuation by the insolvency administrator focuses on preserving the debtor’s business rather than satisfying creditors.
In a separate decision, the BFH ruled on VAT allocation when business activities have ceased, based on the debtor’s previous business activities.
The direct link for VAT deduction is between the administrator’s service and creditor claims related to past business activities.
The XI Senate aligns with previous rulings of the V Senate regarding trustee services and applies them to insolvency law.
Another decision states that a VAT surplus from the preliminary insolvency period should be offset with pre-insolvency VAT, not included in the insolvency estate’s tax calculation.

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.