Un­der Ger­man law, a busi­ness ow­ner may de­duct in­put tax only in the tax pe­ri­od in which all the eli­gi­bi­li­ty re­qui­re­ments of § 15 Abs. 1 No. 1 of the Ger­man Va­lue-Ad­ded Tax Act (UStG) are met in their en­ti­re­ty. The­se re­qui­re­ments in­clude an in­voice with a se­pa­ra­te sa­les tax state­ment – If the­re is a time lag bet­ween the re­ceipt of the ser­vice and the re­ceipt of the in­voice, in­put tax de­duc­tion is only per­mit­ted for the tax pe­ri­od in which both con­di­ti­ons are first met. Ho­we­ver, the Court of Ju­s­ti­ce of the Eu­ro­pean Uni­on sees it dif­fer­ent­ly.
The de­cis­i­on was ren­de­red in a Po­lish case. Nevert­hel­ess, it is equal­ly si­gni­fi­cant for Ger­man law.
The right to in­put tax de­duc­tion is sub­ject to the sub­stan­ti­ve and pro­ce­du­ral re­qui­re­ments and pre­con­di­ti­ons set forth in the VAT Di­rec­ti­ve . The sub­stan­ti­ve re­qui­re­ments are tho­se that go­vern the ac­tu­al ba­sis and scope of this right. The pro­ce­du­ral re­qui­re­ments go­vern the mo­da­li­ties and con­trol of its exer­cise as well as the pro­per func­tio­ning of the va­lue-ad­ded tax sys­tem, such as ob­li­ga­ti­ons re­gar­ding re­cord-kee­ping, in­voi­cing, and tax re­turns.
The right to in­put tax de­duc­tion ari­ses re­gard­less of whe­ther one is in pos­ses­si­on of an in­voice, which is me­re­ly a for­mal pre­re­qui­si­te for its exer­cise. Ho­we­ver, the right can ge­ne­ral­ly only be exer­cis­ed once the tax­pay­er is in pos­ses­si­on of an in­voice.
It should be no­ted that the VAT Di­rec­ti­ve, as well as the prin­ci­ples of VAT neu­tra­li­ty and pro­por­tio­na­li­ty, must be in­ter­pre­ted that they pre­clude na­tio­nal le­gis­la­ti­on un­der which a taxa­ble per­son exer­ci­s­es his right to de­duct in­put tax in a tax re­turn for the pe­ri­od in which he has met the ma­te­ri­al re­qui­re­ments for exer­cis­ing the right to de­duc­tion, if he has not re­cei­ved the cor­re­spon­ding in­voice du­ring that pe­ri­od, even if he re­cei­ved the in­voice be­fo­re fil­ing the tax re­turn.
It is to be ho­ped that the tax aut­ho­ri­ties will take a po­si­ti­on on this mat­ter in a ti­me­ly man­ner. This is be­cau­se the de­cis­i­on also rai­ses prac­ti­cal pro­blems. For ex­am­p­le, the in­put tax de­duc­tion must be ap­pli­ed to the tax pe­ri­od in which the en­tit­le­ment aro­se. In­put tax can­not be de­duc­ted for a la­ter tax pe­ri­od.