The input tax deduction entitles the entrepreneur to deduct the turnover tax paid by him (the so-called input tax) from his turnover tax liability.
Input tax deduction – offsetting received and paid input tax
As the term input tax deduction expresses, i.e. the deduction of input tax , the entrepreneur offsets the sales tax paid by him with the sales tax that he has received from his or her customer through the payment of the invoice.
In this sense, deduction is equivalent to offsetting and balancing. The result of the input tax deduction is either a refund or a subsequent payment of the sales tax. This is done by means of the sales tax notification in addition to the final annual sales tax return .
The same applies, apart from sales tax as input tax, also to import sales tax . If the input tax paid is higher than the value added tax received, then it is technically an input tax surplus. This is equivalent to the claim for reimbursement to the tax office. The input tax deduction ensures that the actual sales tax is paid exclusively by the citizen as the end consumer, in the sense that it is borne by; in addition, from those companies that are not entitled to input tax deduction. Examples of this are the small business regulation according to § 19 Sales Tax Law UStG as well as the income from renting and leasing.
When and under what conditions are you entitled to input tax deduction?
According to WHOLEVEHICLES, the legal basis for the input tax deduction is § 15 UStG . Thereafter, the entrepreneur can deduct the input tax amounts paid in the cases mentioned in paragraph 1 and claim them for tax purposes. The prerequisite for exercising the input tax deduction is that the basis for this is an invoice issued in accordance with §§ 14 and 14a UStG . As an entrepreneur who is entitled to input tax deduction , you have to be very careful that these requirements are actually met in each individual case :
- The invoice must always be an original copy . A duplicate shown as an invoice or a receipt that cannot be identified as an original is not recognized as tax-deductible.
- An electronic invoice replaces the printed and signed original invoice , provided it is genuine, intact and legible. As a rule, it is noted that “… that this electronically generated invoice is valid even without a signature …”.
- Basis for the calculation is always an actually provided power exchange . In terms of sales tax, exchange of services is the designation for a paid delivery or service. One has provided a service for the other and thus triggers the claim to something in return, namely payment. The exact opposite of the exchange of services for VAT purposes is a donation or a gift.
- A handwritten receipt can only replace the sales tax invoice if it contains all mandatory information according to the UStG.
When is input tax deduction not permitted?
In principle, input tax must not be deducted from non-deductible business expenses and, in this respect, not offset. Details are regulated in more detail in § 12 UStG . Any expenses related to private life and maintenance for family members are not deductible even if the expenses are directly related to work. Such borderline cases often lead to disagreements between the taxpayer and the tax office.
As the term makes clear, no input tax deduction is possible for a sales tax-free income because no deductible or offset input tax is shown. According to § 4 UStG , these are services or activities performed by the resident doctor, by alternative practitioner or physiotherapist, through to loan brokerage, teaching at the adult education center or for ambulance transport. You will not find any reported input tax on any of these invoices.
An incorrectly or completely incorrectly issued invoice is also not input tax deductible. This is particularly bitter for you if you have already booked it and the tax office complains about the invoice error afterwards. The invoice will be reversed in such a way that the input tax amount you paid is calculated from the offset amount. On the one hand, your input tax deduction is reduced, while on the other hand, your expenditure increases by this amount. You are paying for something for which you have not received anything in return. In this respect, it is extremely important that you check the formal correctness of the invoice before you pay it and then claim it as input tax deductible at the tax office.
Formal requirement for an invoice according to GoBD and UStG
GoBD stands for the administrative regulation “Principles for the proper management and storage of books, records and documents in electronic form as well as for data access”, valid since January 2015. The GoBD defines the principles of financial management for proper bookkeeping and bookkeeping.
In addition, the GoBD regulates the requirements for electronic data access by the tax authorities in the context of external audits. The legal basis for issuing tax-deductible invoices, both for sales tax and for corporate income tax , is § 14 UStG.
The requirements of the GoBD are rather general. They include:
- The original invoice cannot be changed
- Formal and content accuracy of the invoice document
- Order and correctness of the entire invoice management
- Traceability of the organizational structure within the bookkeeping
The requirements of § 14 UStG, however, are much more specific. According to paragraph 4 , every tax-deductible invoice must contain the following information:
- the full name and full address of the supplier and the recipient of the service
- the tax number issued by the tax office to the providing company or the sales tax identification number issued by the Federal Central Tax Office
- the date of issue as the invoice date
- the invoice number as a consecutive number with one or more series of numbers that is assigned once by the invoice issuer to identify the invoice
- the quantity and type in the customary description of the delivered items or the scope and type of other services
- the time of delivery or other service
- the payment for the delivery or other service, broken down according to tax rates and individual tax exemptions, as well as any reduction in the payment agreed in advance, unless this has already been taken into account in the payment
- the applicable tax rate as well as the tax amount due on the consideration or, in the case of a tax exemption, a reference to the tax exemption
- in the case of Section 14b (1) sentence 5 UStG, a reference to the duty of the service recipient to keep records
- in the case of the invoice being issued by the recipient of the service in accordance with paragraph 2 sentence 2 UStG, the information ” credit “
Avoidable mistakes related to input tax deduction
You have to make as an entrepreneur that both the input – and your invoices objectively and correctly calculated are. This shouldn’t be a problem for your own invoices that you issue for services provided. Once the invoice is available as a sample form , it is there and is in order.
Now it is important that every invoice you receive, pay and include in your input tax deduction is actually input tax deductible. A “real” mistake that can lead to a subsequent correction of the input tax deduction is the defective or incorrect invoice . The regulations of § 14 UStG and the GoBD apply to your invoice verification.
As a young entrepreneur or start-up, the examination of each individual invoice will take noticeably longer at the beginning than from the second or third year of entrepreneurship. Details such as the date of the invoice , the date on which the service was rendered , the tax number or the invoice number should not be missing under any circumstances. And – in your bookkeeping, the original invoice always and exclusively belongs as a receipt; So neither a copy of the invoice nor a duplicate invoice.
Exceptions to the input tax deduction – flat-rate input tax deduction
Apart from the exclusion of input tax deduction for a specific reason or a conditional right to deduct , the flat-rate input tax deduction is the only real exception.
According to § 13 UStG , the sales tax in euros and cents must be calculated exactly on the taxable service and paid to the tax office. The input tax offsetting, also accurate to the cent, is regulated in § 15 UStG. Certain groups of people and professions can derive their credit from input tax as a lump sum. That is the input tax flat rate as an average taxation . In parlance, this is the flat-rate input tax deduction.
The legal basis for this is § 23 UStG “General Average Rates”, § 69 Sales Tax Implementation Ordinance UStDV “Determination of General Average Rates” and § 70 UStDV “Scope of Average Rates”. A flat-rate input tax deduction is only possible if the taxable turnover per calendar year is currently below EUR 61,356 . In addition, the entrepreneur may not be subject to the accounting obligation according to § 23 UStG. Instead, the annual turnover is determined using a simplified income surplus calculation ( EÜR ).
Ultimately, belonging to the relevant professional group is the decisive requirement. For the occupational groups in question, the percentages are set out in an annex to Sections 69 and 70 UStDV, divided into the four areas of craft, retail, other commercial enterprises and liberal professions.
Here are five examples from each category:
- Bakery 5.4% of sales
- Electrical installation 9.1%
- Hairdresser 4.5%
- Vehicle repairs 9.1%
- Tailoring 6.0%
- Flowers and plants 5.7% of sales
- Drugstore 10.9
- Potatoes, vegetables, fruits and tropical fruits 6.4%
- Food and beverages 8.3%
- Newspapers and magazines 6.3%
- Ice cream parlor 5.8% of sales
- Hospitality and catering 8.7%
- Building and window cleaning 1.6%
- Passenger transport 6.0%
- Laundry 6.5%
- Graphic artist and painter 5.2% of sales
- University professors 2.9%
- Journalist 4.8%
- Writer 2.6%
- Self-employed at stage, film, radio and television 3.6%
The input tax deduction is a legal option that you as an entrepreneur should definitely use. The state you the opportunity, receivables with liabilities to charge and pay only the balanced amount. Conversely, you will receive the result from the input tax deduction promptly from the tax office.
With the input tax deduction you definitely improve the liquidity of your company. It is ideal if you and your company belong to the companies according to §§ 69 and 70 UStDV that are entitled to a flat-rate input tax deduction.
But note: here as there, everything has to be right; everything has to be formally, factually and arithmetically correct. The examination of invoices is the A and O for deduction.