Tax - Value Added Tax
The one pager: New principles for the application of input tax allocation pursuant to the overall turnover-based allocation formula
April 15, 2024
Tax - Value Added TaxThe one pager: New principles for the application of input tax allocation pursuant to the overall turnover-based allocation formulaApril 15, 2024 By circular dated 13 February 2024 (III C 2 – S 7306/22/10001:001) the German Federal Ministry of Finance (Bundesministerium der Finanzen) changed the principles for the ap-plication of input tax allocation (Vor-steueraufteilung) pursuant to the ratio of the turnover of the entire enterprise within the meaning of Sec. 15 para. 4 sent. 3 of the German Value Added Tax Act (UStG) (overall turnover-based allocation formula). Calculation of the overall turnover-based allocation formulaThe overall turnover-based allocation formula results from the fraction between the initial turnover entitling to input tax relief (numera-tor) and the overall (net) turnover of the company (denominator) related to the entire taxation period (calendar year) in which the turnover is taxable. The resulting percentage must be rounded up to full percentage points. Turnover not to be included
Primacy of application of other methodsIf another allocation method is more precise, the overall turnover-based allocation formula is not admissible. Other methods used for properties and buildings are in particular:
The application of the overall turnover-based allocation formula therefore always requires a comparison with the other permissible methods. Key contacts
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