Section 4: Tax and input VAT

§ 15 Input VAT deduction

(1) A taxable person may deduct the following amounts:

1. the legally owed VAT amount on supplies of goods and services which have been carried out by a taxable person to another taxable person for the purposes of his business. The application of the input VAT deduction requires that the taxable person is in possession of an invoice issued in accordance with §§ 14,14a. If the separately stated VAT amount refers to a payment made prior to the execution of these transactions, it may already be deducted if an invoice is available and the payment has been made;

2. the import VAT due on goods imported for the purposes of his business in accordance with § 1 paragraph 1 number 4;

3. VAT on the intra-Community acquisition of goods for the purposes of his business provided that the intra-Community acquisition is taxable in Germany in accordance with § 3d sentence 1;

4. VAT on supplies within the meaning of § 13b paragraph 1 and 2, which have been carried out for the purposes of his business. If the VAT refers to a payment made prior to the execution of the supply, it shall be deductible once the payment has been made;

5. VAT owed in accordance with § 13a paragraph 1 number 6 on transactions executed for the purposes of his business.

The supply, importation or intra-Community acquisition of goods, which are used less than 10 percent by the taxable person for his business, shall not be regarded as being carried out for the purposes of his business.

(1a) VAT amounts attributable to expenses subject to the non-deductibility provisions of § 4 paragraph 5 sentence 1 numbers to 4, 7 or § 12 number 1 of the Income Tax Act are not deductible as input VAT. This shall not apply to entertainment expenses if § 4 paragraph 5 sentence 1 number 2 of the Income Tax Act excludes a deduction of appropriate and proven expenses.

(1b) Where a taxable person uses immoveable property both for the purposes of his business, as well as for non-business purposes or for the private use of his employees, VAT for the supply of goods and services, importation and intra-Community acquisition, as well as other services associated with the immoveable property are excluded from input VAT deductions when they have not arisen in the course of the use of the immoveable property for the purposes of the business. For permissions, subject to the provisions of the Civil Law on land and for buildings on third-party land and soil, sentence 1 shall apply accordingly.

(2) VAT on supplies, the importation and intra-Community acquisition of goods, as well as on supplies of services, which the taxable person uses to execute the following transactions, are excluded from input VAT deduction:

1. VAT exempt transactions;

2. transactions taxable abroad, which would be VAT exempt if such were carried out in Germany.

Goods or services, which are used by the taxable person to carry out an import or an intra-Community acquisition, are to be attributed to the transactions for which the imported or the intra-Community acquired goods are used.

(3) Exclusion from input VAT deduction, within the meaning of paragraph 2, shall not apply if the transactions

1. in the cases referred to in paragraph 2 sentence 1 number 1

   1. are VAT exempt in accordance with § 4 number 1 to 7, § 25 paragraph 2 or according to the regulations stipulated in § 26 paragraph 5, or

   2. are VAT exempt in accordance with § 4 number 8 lit. a to g, number 10 or number 11, and are directly related to goods exported to a third country territory;

2. in the cases referred to in paragraph 2 sentence 1 number 2

   1. would be VAT exempt in accordance with § 4 number 1 to 7, § 25 paragraph 2 or according to the regulations stipulated in § 26 paragraph 5, or

   2. would be VAT exempt in accordance with § 4 number 8 lit a to g, number 10 or number 11 and the recipient is resident in a third country territory or if the transaction directly involves goods that are exported to a third country territory.

(4) Where the taxable person uses goods supplied, imported or acquired under an intra-Community acquisition or a service utilised by him only in part for the purpose of executing transactions that exclude input VAT deduction, the portion of the relevant input VAT amount, which is economically attributable to the transactions, which gave rise to the exclusion of input VAT deduction, shall not be deductible. The taxable person may determine the non-deductible partial amounts by means of appropriate estimates. The non-deductible part of the input VAT deductions may only be determined based on the relationship between the transactions excluded from input VAT deduction and the transactions eligible for such input VAT deduction, where no other economic allocation is feasible. In the cases referred to in paragraph 1b, sentences 1 to 3 shall apply accordingly.

(4a) The following restrictions on input VAT deduction shall apply to suppliers of new vehicles (§ 2a):

1. Only VAT attributable to the supply, importation and intra-Community acquisition of the new vehicle shall be deductible.

2. VAT may only be deducted up to the amount that would be owed on the supply of the new vehicle if the supply was not VAT exempt.

3. VAT can only be deducted at the time when the supplier of the vehicle executes an intra-Community supply of the new vehicle.

(4b) For taxable persons who are not resident in Community territory and who are only liable for VAT according to § 13b paragraph 5 and § 13a paragraph 1 number 1 in connection with § 14c paragraph 1 or are only liable for VAT according to § 13b paragraph 5 and § 13a paragraph number 4, the restrictions referred to in § 18 paragraph 9 sentences 5 and 6 shall apply accordingly.

(5) The Federal Ministry of Finance, with the consent of the Federal Council, may issue a directive stipulating more precisely

1. in which cases and under what conditions, for reasons of simplifying the taxation procedure for input VAT deduction, the requirement of the possession of an invoice can be waived according to § 14 or certain invoice requirements therein can be waived;

2. for the purposes of simplification or the prevention of hardship, under what conditions, for which taxation period and to what extent, in cases where a person other than recipient of the supply pays consideration (§ 10, sentence 3), the other person may claim the input VAT deduction, and

3. when, in cases of little tax importance, for the purposes of simplification or the prevention of hardship, transactions not eligible for input VAT deduction need not be taken into account in attributing input VAT deduction (paragraph 4) or when it can be refrained from attributing input VAT to these transactions.