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VAT6 min read

Input VAT deduction

Short definition

Through the input VAT deduction, an entrepreneur subtracts the VAT he himself has paid on incoming invoices from his own VAT liability. Economically, VAT becomes a pass-through item for him – provided all conditions are met.

Also known as:Input VAT§ 15 UStGVorsteuer

The input VAT deduction is the heart of the German VAT system. It ensures that VAT ultimately reaches the end consumer rather than burdening every business along the way. But: anyone who underestimates the formal requirements quickly loses it – and with it up to 19 % on every incoming invoice.

Requirements for the input VAT deduction

  1. The recipient is an entrepreneur under the VAT Act (not a small-business taxpayer under § 19 UStG).
  2. The supply is acquired for the business – not for private use.
  3. A formally correct invoice under §§ 14, 14a UStG exists (all mandatory fields).
  4. The supply has actually been performed (no advance invoice without delivery).
  5. No exclusion rule applies (e.g. § 15 (1a) UStG).

Mandatory invoice details

For an invoice to entitle to input VAT deduction, it must include eight mandatory fields: full name and address of supplier and recipient, tax number or VAT-ID, invoice date, sequential invoice number, quantity and type of supply, time of supply, the consideration broken down by tax rate, and the VAT amount and rate shown separately.

Invoice review

Stop losing input VAT.

We review your incoming invoices automatically via DATEV Unternehmen Online – formally incorrect invoices are flagged before posting and returned to the supplier. On average we recover 4–6 % of the previously lost input VAT per year for our clients.

When is the input VAT deduction excluded?

Classic cases: expenses for private living (§ 15 (1a) UStG), gifts above €50 per recipient per year, and input supplies used for VAT-exempt output supplies without an opt-in (e.g. long-term residential letting). For mixed use (private/business or taxable/exempt), input VAT must be allocated appropriately.

Special case: input VAT on passenger cars

For business cars, full input VAT deduction is possible if business use is at least 10 %. However, VAT must be paid on the private-use share – either via the 1 % flat-rate method or with a logbook. For fully electric vehicles, this VAT burden is largely eliminated.

Frequent questions

What clients ask about this most often

  • No. Anyone using the small-business rule under § 19 UStG does not charge VAT and is therefore not entitled to deduct input VAT. With high input volumes, opting for standard taxation is often worth it.
  • The input VAT deduction is initially denied. However, the invoice can be corrected – under recent BFH case law, a correction even takes effect retroactively. Still: getting it right the first time is preferable.
  • If the use of the asset changes after the fact (§ 15a UStG) – e.g. a building first rented out subject to VAT later becomes VAT-exempt – the input VAT must be repaid pro-rata over up to ten years.

Your next step

How does Input VAT deduction impact your business specifically?

Theory is one side – your concrete numbers are the other. In a 30-minute introductory call we will show you which lever fits your situation. Free, written offer included.

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