Input Tax Deduction When Switching Between Small Business and Standard VAT Taxation: New BMF Guidance

• The BMF clarified rules on input tax deduction when switching between small business and regular VAT taxation.
• Input tax deduction is excluded for services received before switching to regular taxation, even if intended for taxable sales after the switch.
• The actual switch constitutes a change in circumstances, allowing input tax adjustment only under § 15a UStG and within certain limits.
• Switching from regular to small business taxation also requires input tax adjustment, potentially to the entrepreneur’s detriment.
• The updated rules apply to all open cases, but previous rules can be used for VAT returns submitted before November 10, 2025.

Source: datenbank.nwb.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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