Input VAT deduction in Germany: conditions and exclusions under section 15 UStG

The essentials in brief

• Business: the supply or service must have been performed by another business for your business (section 15 (1) sentence 1 no. 1 UStG).
• Invoice: you must hold an invoice issued under sections 14 and 14a UStG.
• 10 percent rule: if you use an item less than 10 percent for your business, it is not treated as performed for the business.
• Further cases: import VAT, intra-Community acquisitions and the tax under section 13b UStG are also deductible (section 15 (1) nos. 2 to 4 UStG).
• Exclusions: for example for turnover that is itself tax-exempt (section 15 (2) UStG).
• Small businesses: no input VAT deduction (section 19 (1), section 15 (2) sentence 1 no. 1 UStG).

The conditions at a glance

What an invoice must contain is in mandatory invoice details in Germany. If details are missing or wrong, the invoice can be corrected (section 31 (5) UStDV).

Which amounts are deductible?

Under section 15 (1) UStG you can deduct these input VAT amounts:

• Invoices from other businesses: the tax legally owed for supplies and services for your business (no. 1).
• Imports: import VAT that arose on goods imported for your business (no. 2).
• Intra-Community acquisitions: the tax on the intra-Community acquisition of goods for your business if it takes place in Germany (no. 3).
• Reverse charge: the tax on services within section 13b (1) and (2) UStG performed for your business (no. 4). More: reverse charge under section 13b.

Prepayments

If you pay before the service has been performed, you can already deduct the separately shown tax once you hold the invoice and have paid (section 15 (1) sentence 1 no. 1 sentence 3 UStG).

When is input VAT deduction excluded?

The law excludes or limits deduction in these cases:

• Non-deductible expenses: input VAT on expenses covered by the deduction ban of section 4 (5) sentence 1 nos. 1 to 4, 7 or section 12 no. 1 EStG is not deductible (section 15 (1a) sentence 1 UStG). There is an exception for entertainment expenses (section 15 (1a) sentence 2 UStG).
• Tax-exempt turnover: input VAT on services you use for tax-exempt turnover is excluded (section 15 (2) sentence 1 no. 1 UStG). Section 15 (3) UStG sets out exceptions.
• Mixed use: if you use an item only partly for turnover that excludes deduction, the corresponding part is not deductible; you may estimate it reasonably (section 15 (4) UStG).
• Small businesses: anyone using the small-business rule has no input VAT deduction (section 19 (1), section 15 (2) sentence 1 no. 1 UStG). More: advance VAT return for small businesses.

When is input VAT set off?

The input VAT amounts that fall in the tax period and are deductible under section 15 are deducted from the tax on your sales (section 16 (2) sentence 1 UStG). In the return you see this as a balance: VAT minus input VAT. How to enter input VAT in ELSTER is in VAT return: entering input VAT and expenses.

Example: a laptop for the business

You buy a laptop for your business. The invoice says 1,000 euros net plus 190 euros VAT (19 percent), issued under sections 14 and 14a UStG.

The example is an illustration. With private use somewhere between the extremes, the deduction depends on further rules not covered in this article.

Small-amount invoices

You can also deduct input VAT on an invoice of not more than 250 euros if you split the invoice amount into net amount and tax (section 35 (1) UStDV). The conditions of this invoice are in small-amount invoices up to 250 euros.

Common mistakes

• Not holding an invoice. Without an invoice issued under sections 14, 14a UStG there is no deduction (section 15 (1) sentence 1 no. 1 UStG).
• Deducting private expenses. The service must be performed for your business.
• Overlooking the 10 percent rule. Under 10 percent business use the item is not treated as received for the business.
• Forgetting input VAT from reverse charge. The tax under section 13b is deductible (section 15 (1) no. 4 UStG).
• Claiming input VAT as a small business. There is no deduction (section 19 (1), section 15 (2) sentence 1 no. 1 UStG).
• Not having a faulty invoice corrected. The issuer can correct wrong or missing details (section 31 (5) UStDV).

How it works with VAT GPT

The input VAT from your invoices reaches the return in three steps:

1. Upload files: your Amazon or eBay CSV reports and your invoices. The AI reads date, amounts (gross, net, VAT), currency and country.
2. Check the result: VAT GPT breaks down the VAT for Germany and the EU (OSS) and prepares the advance return, monthly or quarterly. For expense invoices from Germany with VAT shown, VAT GPT takes the tax amount into the input VAT field of the return. You check and confirm.
3. Send: with VAT GPT Pro via ELSTER directly to the tax office.

Everything is in one place: VAT return, annual VAT return, OSS return, EÜR, trade tax and income tax return. With Go you use all Pro features free of charge for 30 days. Get to know VAT GPT or create an account right away.

What VAT GPT does not do

• VAT GPT is not tax advice, for example on whether you use an item more than 10 percent for your business.
• The AI reads date, amounts, currency and country; whether an invoice contains all mandatory details under section 14 (4) UStG is for you to check.

What does VAT GPT cost?

Free (basic features, free of charge), Go (30 days free with all Pro features), Pro €49 per month or €444 per year, each including VAT.

Frequently asked questions

What do I need for input VAT deduction? A supply or service from another business for your business and an invoice issued under sections 14 and 14a UStG (section 15 (1) sentence 1 no. 1 UStG).

Can I deduct input VAT without an invoice? For tax on supplies and services from other businesses, no: exercising the right requires that you hold an invoice issued under sections 14 and 14a UStG (section 15 (1) sentence 1 no. 1 sentence 2 UStG). For import VAT, intra-Community acquisitions and reverse charge, section 15 (1) sentence 1 nos. 2 to 4 UStG does not name this condition.

Does deduction apply to mixed use? With mixed use, a part may be excluded (section 15 (4) UStG). Under 10 percent business use an item is not treated as received for the business.

Can a small business deduct input VAT? No (section 19 (1), section 15 (2) sentence 1 no. 1 UStG).

Can I deduct input VAT from a small-amount invoice? Yes, if you split the amount into net and tax (section 35 (1) UStDV).

Can I deduct input VAT from the reverse charge? Yes, under the general conditions (section 15 (1) no. 4 UStG).

Further reading

• File a VAT return online in Germany
• VAT return: entering input VAT and expenses
• Reverse charge under section 13b UStG
• Mandatory invoice details in Germany

Not tax advice: the content does not replace individual advice.

Sources

• Section 15 UStG (in German)
• Section 16 UStG (in German)
• Section 31 UStDV (in German)
• Section 35 UStDV (in German)
• section 19 UStG (in German)