Revocation of permission for actual taxation due to abuse – Input tax deduction entitlement of the recipient

• The right to deduct input tax under § 15 para. 1 sentence 1 no. 1 UStG does not necessarily correlate with the corresponding VAT due, except for down payments.
• In cases where the service provider calculates VAT based on received consideration according to § 20 UStG, this can lead to a situation where input tax deduction arises without an obligation to pay VAT on the part of the service provider.
• A discrepancy between the emergence of VAT and the input tax claim was exploited by an entrepreneur in a business group as a free financing vehicle.
• The Federal Fiscal Court (BFH) addressed the question in a judgment of 12.7.2023
• XI R 5/21 regarding the behavior of a plaintiff who claimed input tax deductions from service relationships within a business group over several years, where the providers taxed their sales based on received consideration and made mutual payments with some delay.

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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