Input VAT Deductibility in Case of Mixed Used Buildings


Proportion of deductible input VAT relating to mixed used buildings is generally determined based on an area based allocation formula.

With judgment dated 7 May 2014 (V R 1/10), the Federal Fiscal Court (Bundesfinanzhof, BFH) in principle confirmed its prior jurisprudence regarding the deductibility of input VAT in case of mixed used buildings. At the same time, however, the court renounced a formerly expressed opinion according to which the taxpayer could in certain cases choose the calculation method of input VAT ratio. It rejected a decision of the Fiscal Court Münster, which had come to the conclusion that the incompatibility of input VAT allocation under current German law with European law gives reasons for the taxpayer to choose the calculation method of input VAT ratio. Nonetheless, the interpretation of certain input VAT provisions compliant with European law gives leeway for tax planning.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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