By means of its letter of 27.01.2023, the German Federal Ministry of Finance intends to uniformly regulate VAT issues regarding the scope of input VAT deduction for research institutions. The tax authorities will henceforth be very generous in their treatment. Universities, specialist colleges and also non-university research institutions will be able to claim input VAT deduction to a much greater extent than previously. This applies not only as regards the future, but also to the past. The recommendation is therefore: Check the possible source of funding!

For photovoltaic systems a new VAT rate of 0% applies according to sec. 12 para. 3 of the German VAT Act as of 01.01.2023. However, the conditions attached to this, in the wording of the law, offer immense scope for interpretation. In this respect, the fear slowly spread that, in practice, supplier would subsequently be required to pay 19% VAT, which they would probably not be able to claim from their customers under civil law and in economic terms. For this reason, the Federal Ministry of Finance guidance on this topic was awaited with great interest.

In two decisions, the German Federal Fiscal Court clarifies and narrows down the allocation of ancillary and auxiliary transactions to a taxable activity using the example of the acquisition of so-called luxury vehicles by a taxable person with a different main activity. The acquisitions only fall within the taxable sphere and entitle the taxpayer to an input VAT deduction if the transaction, viewed in isolation, is an economic activity or if the taxable main activity is directly, permanently and necessarily expanded. In order to secure the input VAT deduction, it must henceforth be ensured that an economic connection to the main business activity can be justified.