Vorsteuer

Vorsteuer, or input tax, refers to the value-added tax paid on goods and services purchased by a business that is entitled to deduct VAT. In the VAT system, businesses charge VAT on their own sales (output tax) and can deduct the VAT paid on purchases (input tax). The net VAT payable to the tax authority is the difference between output tax and input tax.

To claim Vorsteuer, the business must be VAT-registered and use the purchases for taxable transactions. It requires valid invoices that meet statutory requirements (supplier name and address, VAT number, amount, VAT rate, date). Private use reduces the deductible amount; partial deduction is allowed according to the proportion of taxable use. Intra-EU purchases have additional rules, such as reverse-charge in some cases, and cross-border rules may affect how the input tax is claimed.

Deduction is claimed in the VAT return, typically monthly or quarterly, via the Vorsteuerabzug line. If input tax exceeds output tax, a refund can be requested. In accrual and cash accounting regimes, timing may differ, and the treatment of certain purchases may vary. Records and audit trails must be kept to support the deduction.

Cross-border and adjustments: For acquisitions from other EU member states, the reverse-charge mechanism may apply; the purchaser accounts for VAT in their own return, and the corresponding Vorsteuer can be deducted if eligible. If the use of purchased assets changes from taxable to exempt or to private use, a Vorsteuerkorrektur may be required, adjusting the deductible amount accordingly.

Significance: Vorsteuer is a central element of VAT neutrality, helping prevent tax on business inputs and influencing cash flow and pricing. Proper documentation, timely filings, and awareness of eligibility rules are essential to maintain deduction rights.