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 Legal Basis for Input Tax Correction in Germany

The following points form the legal basis for input tax correction, based on the German tax code for sales and purchases (UStG) and the ordinance regulating sales/purchase tax (UStDV):

  • The right to an input tax deduction arises at the time of service.

  • If the decisive factors leading to the original input tax deduction change significantly at a later date, then the input tax must be corrected, provided that the trivial amount limits were exceeded.

  • A change in the decisive factors is defined as:

    • Actual usage differs from the usage used as the basis for the input tax deduction (planned usage).

    • The (still usable) assets are sold or removed (excluding sale of the business).

    • The tax status of the company changes.

The corrections affect the following time period :

  • Start date of correction:

    First actual use; if the first use is staggered for different parts of the asset, then the correction applies only to the parts already in use.

  • Duration:

    Five years ; for land and buildings: ten years

  • Monthly correction taking trivial amount limits into account

  • In the case of one-time use for the purpose of earning revenue (purchase of land without actual use, resale only) the correction is made as a total amount at the time of use.

Input tax can be deducted and corrected for the following objects or services:

  • Fixed assets

  • Current assets, such as purchase and sale of land

  • Installed equipment or additions (even if they do not increase value), provided they can not be used independently, for example, central air conditioning, fitted kitchens, balconies, elevators.

  • Improvements that are made to an asset, even if they do not increase value, such as, external painting, general overhaul of furnace, general refurbishment and renovation.

  • Improvements or services not made to an asset, such as, costs of appraisals, licenses, computer programs.

    Note Note

    You group these objects and services together in the SAP System using correction objects .

    End of the note.

Input tax correction does not apply to services that are consumed at the time of service, such as cleaning and gardening services.