Berlin-Brandenburg Tax Court Allows Input VAT Deduction for Unsuccessful Project Claims

• The Lower Tax Court of BerlinBrandenburg ruled on May 29, 2024, that input VAT deductions are possible even if commercial negotiations are unsuccessful and no transactions occur
• The court considered CJEU case law in its decision
• The case involved a trader who had planned a specific project, an operating agreement, and had engaged a subcontractor
• The customer canceled the contract before the project was implemented, leading the trader to claim damages to compensate the subcontractor
• Legal consulting costs incurred in claiming these damages are eligible for input VAT deduction
• The court found a direct and immediate link between the consulting services and the planned economic activity, which would have allowed VAT deductions from operating fees
• An appeal against this ruling has been filed, reference number BFH V R 15/24

Source: hub.kpmg.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.