Germany: Federal Fiscal Court upholds time limits for input VAT deduction

The German Federal Fiscal Court has handed down a new decision on the time limits for input VAT deduction. Originally, it was expected to decide on the requirements for the deduction of import VAT by a warehouse keeper. According to the court’s decision, this question was not of significance. Rather, the Federal Fiscal Court confirmed a decision of the 11^th chamber regarding time limits for input VAT deduction (decision of December 1 2010, XI R 28/08).

Decision of the Federal Fiscal Court
Initially, the Customs authorities assessed import VAT against the appellant for the fiscal year 2008. However, the appellant claimed the respective input VAT deduction only in the fiscal year 2009.

The Federal Fiscal Court rejected the deduction of input VAT in 2009. The decision was based on the wording of the general provisions both of the German VAT Act and the VAT Directive. As a result, the decision is not solely authoritative about input VAT deduction in terms of import VAT or input VAT deduction in general.

Consequences in practice
To facilitate matters, it is not uncommon to claim input VAT in the current VAT period even if the requirements have already been met in a prior period. This is not without risk, though tax auditors do not usually challenge it. The input VAT deduction would have to be rejected based on a respective assessment by the tax auditor. In general, the enforcement of an input VAT deduction is possible by filing an amendment for the appropriate period. However, this depends on whether the tax assessment is materially definitive or not. If the tax assessment is no longer amendable, according to the decision of the Federal Fiscal Court, the input VAT is no longer deductible. For this reason, and to avoid further consequences, taxable persons are not permitted to deduct input VAT in such cases.

The time limit for input VAT deduction does not affect cases in which invoices charging VAT are received at a later time, for example, due to a necessary correction of the invoice or because the original has been lost in the post.

In practice, it might be difficult to claim a deduction of import VAT which is paid by third parties, if the third party charges the disbursed import VAT quite late (for example, because a claim for input VAT deduction by the third party was rejected as it was not entitled to an input VAT deduction due to not having the right to dispose of the goods). In the opinion of the German tax authorities, it is the time at which the import VAT is incurred, (date of import VAT assessment notification), which is significant for the appropriate VAT period, not its charge. In such cases, there is a high risk that the actual beneficiary of the input VAT deduction may no longer apply for the deduction, as the tax assessment for the appropriate period is already definitive.

Christian Salder (christian.salder@kmlz.de) is a partner of KÜFFNER MAUNZ LANGER ZUGMAIER, the principal Germany correspondents of the indirect tax channel on www.internationaltaxreview.com

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