Retroactive effect of invoice corrections on input tax deduction
Refusing the deduction of input tax because of formal invoice deficiencies is a classic point of contention in tax audits and can have significant financial consequences for companies, in particular, also in terms of interest on subsequent payments. However, according to the relevant case law of the European Court of Justice and the Federal Fiscal Court (Bundesfinanzhof, BFH), under certain conditions, retroactive corrections to invoices are not harmful for the deductibility of input tax. A recent decision by the BFH addressed these principles once again and confirmed the previous line of case law.
A correction to an invoice only has a retroactive effect for input tax deduction if the document that was originally issued already had the character of an invoice and only some – non-essential – details were missing. In the ruling thus handed down on 25.6.2025 (case reference: XI R 17/22), the BFH drew on its established case law, according to which a distinction must be made between the correction of an erroneous invoice and the first time a proper invoice is issued. A retrospective correction requires the original document to have been considered an invoice for VAT purposes. This is anyway the case if the invoice contains details of the invoice issuer, the recipient of the goods or services, a description of the performance, the remuneration as well as the VAT, which must be shown separately. By contrast, if essential mandatory information is completely missing then this would not be an invoice that could be corrected.
Once the corrected document constitutes a proper invoice, the right to deduct input tax would only arise in the taxation period in which the invoice recipient received this invoice. In this case, a retroactive effect on the original period of performance would be ruled out. This distinction is of great importance, in particular, for the interest pursuant to Section 233a of the German Fiscal Code.
Moreover, beyond the specific correction standard, in its ruling the BFH clarified that the right to deduct input tax must be exercised in the general taxation procedure if the right arose at a time when the business was still carrying out taxable output transactions in Germany. This would still apply even if a business only received the invoice with the VAT shown separately at a later date when it is no longer carrying out any transactions in Germany.
