BMF Provides Guidelines for Input Tax Allocation Based on Turnover Key

• The German tax authorities have issued a new letter clarifying the rules for the allocation of input tax based on turnover.
• If a business uses services for both deductible and non-deductible purposes, the input tax must be allocated.
• The allocation can be based on turnover if no other method is available, but EU regulations must also be considered.
• The tax authorities have previously provided guidance on input tax allocation for real estate and special cases.
• The new letter clarifies the rules for allocation based on turnover, following a 2016 ruling by the European Court of Justice.
• The letter also explains that input tax allocation based on total turnover must be rounded to the nearest whole percentage, unless a more precise method is allowed.
• The letter supplements existing guidelines on input tax allocation in the German VAT guidelines.

Source: haufe.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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