Input VAT refers to certain VAT amounts that an entrepreneur can deduct from their VAT debt under the conditions of Section 15 of the German VAT Act (UStG). This includes, in particular, the statutory VAT owed on services performed by another entrepreneur for the business.
What is Input VAT?
If a business owner purchases goods or other services for their business, the VAT payable on these may be deductible as Input VAT, subject to the statutory conditions.
The Vorsteuer deduction is an essential part of the VAT system. It fundamentally prevents the VAT from having a definitive tax burden at each corporate level, provided the legal requirements for the deduction are met.
When can Input VAT be deducted?
In the case of supplies and other services provided by another trader, the Vorsteuerab deduction is subject, in particular, to the condition that the service was performed for the company and that the trader holds an invoice issued in accordance with the statutory provisions.
The Vorsteuer deduction may be excluded or restricted, for example if related services are used for transactions that exclude the Vorsteuer deduction.
Important: VAT on a Purchase invoice does not automatically mean it is deductible as Input VAT. The requirements of Section 15 of the German Value Added Tax Act (UStG) are decisive.
What other amounts can be Input VAT?
The term Input VAT is not limited to the VAT shown in a standard Purchase invoice.
Section 15 of the German Turnover Tax Act (UStG) also covers, under the respective conditions, for example:
- Import VAT for items introduced for the company,
- VAT on certain intra-Community acquisitions and
- Tax on services for which the recipient of services according to the Reverse charge procedure The person liable for tax is.
Input VAT and VAT – what is the difference?
Value Added Tax and Input VAT are not different types of tax. Rather, the terms describe different perspectives within the Umsatzsteuer system.
In the case of a taxable outward supply, the entrepreneur is generally liable for VAT. For a service received for his business, a corresponding amount of tax may be deductible as Input VAT under statutory conditions.
In short: VAT arises on the output side – Input VAT refers to certain tax amounts that are deductible on the input side or in legally regulated acquisition cases.
What role does Input VAT play in advance VAT return?
Deductible Vorsteuer amounts are taken into account when calculating the VAT. In principle, they reduce the tax amount resulting for the respective assessment period.
In the VAT Return the relevant VAT and Vorsteuer amounts for the respective advance return period are taken into account. This may result in an advance payment or a surplus in favour of the entrepreneur.
