The Federal Fiscal Court has implemented the ECJ judgment in the case Mitteldeutsche Hartstein-Industrie AG (C-528/19) and made two crucial statements: an indirect link is sufficient for the deduction of input VAT and a supply carried out free of charge is not taxable if there is no threat of an untaxed final consumption. This clear Federal Fiscal Court decision is pleasing. After 10 years, the tax authority has been compelled (once again) to change its mind. This time in favour of taxable persons.
Warranty commitments are a common instrument used in sales promotion. Since they are on the borderline between VAT and insurance tax, they are also a hot topic from a tax perspective. In particular, warranty commitments in the car trade have become well-known, due to the Federal Fiscal Court having taken a number of decisions in this area in recent years. In addition, the Federal Central Tax Office, which is responsible for insurance tax, has also taken a special interest in cases concerning warranty commitments as a field of examination. Uncertainty has therefore been considerable over the last few years. The Federal Ministry of Finance has now taken up the issue and assessed it from both a VAT and an insurance tax perspective.
The Federal Fiscal Court decided that, in 2006, an investment company could not claim input VAT deduction from certain services which it had procured for its activities as the manager of a real estate investment fund. More precisely, this concerns services, the costs of which are charged by the investment company to the investment fund without a profit mark-up. Based on this decision, it is likely that the tax authorities will reject the input VAT deductions of capital management companies in similar constellations.