Tax - Value Added Tax

By circular dated 13 February 2024 (III C 2 - S 7306/22/10001:001) the German Federal Ministry of Finance (Bundesministerium der Finanzen) changed the principles for the ap-plication of input tax allocation (Vor-steueraufteilung) pursuant to the ratio of the turnover of the entire enterprise within the meaning of Sec. 15 para. 4 sent. 3 of the German Value Added Tax Act (UStG) (overall turnover-based allocation formula).

Calculation of the overall turnover-based allocation formula

The overall turnover-based allocation formula results from the fraction between the initial turnover entitling to input tax relief (numera-tor) and the overall (net) turnover of the company (denominator) related to the entire taxation period (calendar year) in which the turnover is taxable.
As part of the self-assessment return proce-dure, the calculation can be carried out on the basis of the previous year and corrected in the annual assessment. However, the requirements for the input tax adjustment pursuant to Sec. 15a UStG must be reviewed annually.

The resulting percentage must be rounded up to full percentage points.

Turnover not to be included

• In particular, the following turnover must not be included in the calculation:
  imports
• intra-Community supply
• turnover for which the beneficiary owes VAT (Sec. 13b UStG)
• turnover from the sale of fixed assets or capital goods
• ancillary sales from property transactions
• ancillary sales from financial transactions and turnover pursuant to Sec. 4 no. 8 lit. a to h UStG (e.g. credit brokerage or business with receivables)
• turnover from the sale of a business as a whole (Sec. 1 para 1a UStG)
• turnover from investment income

Primacy of application of other methods

If another allocation method is more precise, the overall turnover-based allocation formula is not admissible. Other methods used for properties and buildings are in particular:

• area-based allocation formula (Flächen-schlüssel)
• object-related turnover-based allocation formula (objektbezogener Umsatzschlü-ssel)
• usage times
• earnings value method (Ertragswertever-fahren)
• calculation of areas pursuant to DIN 277, the German Residential Space Ordinance (WoFlV) or the gross building valu

The application of the overall turnover-based allocation formula therefore always requires a comparison with the other permissible methods.

Jens Binding, M.Sc.

Counsel

Dusseldorf, Germany

Thomas Leiminger

Associate

Dusseldorf, Germany