If an entrepreneur based abroad wishes to deduct German input VAT and is not required to register for VAT purposes, an application for input VAT refund is to be submitted. In addition to the generally non-extendable deadlines in the input VAT refund procedure (30 June of the following year for entrepreneurs based in third countries and 30 September of the following year for entrepreneurs based in other Member States of the EU), strict formal requirements are to be met. In this context, the ruling of the Federal Fiscal Court (BFH) of 25 June 2025 (XI R 17/22), published on 30 October 2025, is to be welcomed.
The BFH ruling extends input VAT deduction for foreign entrepreneurs in Germany. The BFH ruled that input VAT can be deducted in the general taxation procedure instead of the input VAT refund procedure, even if there are no domestic supplies at the time of receipt of the incoming invoice.
In the case in question, an entrepreneur based in a third country carried out a taxable supply of goods in Germany in 2018 and was registered for VAT for this purpose. Due to incorrect invoicing by the supplier, a correct invoice was only issued after amendment at the beginning of the following year, 2019. The tax office refused the input VAT deduction on the grounds that no taxable transactions had been carried out in the year in question and that the input VAT refund procedure therefore applied. The Federal Central Tax Office, which is responsible for the input VAT refund procedure, rejected the application for input VAT refund on the grounds of lack of reciprocity. As a precautionary measure, the entrepreneur therefore claimed the input VAT in his 2018 VAT return.
The BFH ruled that the first-time issuance of an invoice including VAT has no retroactive effect and is therefore generally only possible upon receipt of the amended invoice (invoice including German VAT). At the same time, the BFH ruled that the right to deduct input VAT arises as soon as the supply is received and can therefore also be deducted in the general taxation procedure if there is a VAT registration obligation at that time.
When receiving invoices with German input VAT, foreign entrepreneurs should check whether there is a VAT registration obligation in order to deduct input VAT in the less complex and more liquidity-friendly general taxation procedure. If there is no registration obligation, the strict requirements of the input VAT refund procedure are to be met and the non-extendable deadlines are to be observed. In addition, foreign entrepreneurs should check whether input VAT deduction has been missed in the past and, if so, whether it can still be claimed through earlier VAT registration.