Input VAT is the value added tax (VAT) that a business pays to its suppliers when purchasing goods or services and which it may reclaim from the tax office in whole or in part under the conditions of the German VAT Act (UStG). Practically, it is the VAT shown on incoming supplies, which is claimed as an input VAT deduction in the VAT advance return or the annual VAT return.
Legal basis and prerequisites
The right to deduct input VAT is governed in particular by § 15 UStG. Important prerequisites are:
- You are an entrepreneur within the meaning of the UStG and you use the acquired supplies/services for your business.
- A proper invoice exists that meets the statutory requirements pursuant to § 14 UStG.
- The supply has been performed and the invoice is payable with respect to the input VAT amount (the receipt of the invoice is decisive).
Also observe the correction rules of § 15a UStG, which apply in particular to partial or changed use of fixed assets. Small businesses under § 19 UStG (Kleinunternehmer) cannot, however, claim input VAT deductions.
Practical posting and concrete examples
In accounting, the input VAT paid is recorded separately from the net acquisition costs so it can be reported in the VAT advance return. Typical entry for a goods purchase:
- Debit: Purchases / Goods received (Net)
- Debit: Input VAT (VAT amount)
- Credit: Accounts payable / Trade payables (Gross amount)
Example (19% VAT):
| Net | VAT 19 % | Gross |
|---|---|---|
| €1,000.00 | €190.00 | €1,190.00 |
In the VAT advance return the input VAT (here €190.00) is offset against the VAT amounts you have collected. If a surplus of input VAT arises (input VAT > VAT charged), you apply for a refund or a set-off is made against other tax liabilities.
Buchhalterischer Ablauf bei Erstattung
- Submit monthly/quarterly VAT advance returns (observe deadlines).
- Declare input VAT in the advance return and offset it against VAT charged.
- The tax office will order a refund or make a set-off.
Restrictions, corrections and special cases
Not every VAT amount paid is deductible as input VAT. Important exclusion cases are:
- Private use or non-business activities.
- Input VAT on entertainment expenses (only 50% deductible for business meals under conditions) and restrictions on certain representation expenses.
- Supplies used for tax-exempt sales may lead to an exclusion or a proportional reduction of the input VAT deduction.
If the use changes (e.g. from business to private or vice versa), the input VAT adjustment rules under § 15a UStG apply. Corrections may also be required in case of errors on invoices.
Import and intra-Community acquisitions
Import VAT can be claimed as input VAT under certain conditions. For intra-Community acquisitions the tax generally arises in the course of acquisition taxation and is likewise deductible as input VAT provided the legal requirements are met.
Practical tips for freelancers and small businesses
For a smooth input VAT deduction, the following measures are recommended:
- Check invoices immediately: ensure complete details according to § 14 UStG (time of supply, tax rate, tax amount, VAT identification number for intra‑Community supplies).
- Store documents digitally and in an orderly manner: retention period is usually 10 years; ensure access.
- Check small business status: if you apply the small business scheme under § 19 UStG, you forgo the input VAT deduction—this has pros and cons.
- Document special cases: company car use, mixed-use premises or entertainment expenses should be recorded separately to avoid queries from the tax office.
If in doubt, consult a tax advisor—especially for complex cases such as capital goods with long-term use or cross-border supplies. This ensures the input VAT deduction is applied correctly and potential clawbacks are avoided.