Even in accordance with current financial case law, the right to input tax deduction critically depends on complete and formally correct incoming invoices. For corporate service recipients, precise monitoring is still one of the up to ten mandatory value-added tax details and is thus indispensible.

If invoices are disapproved by the Tax Office, there are usually financially sensitive consequences. Even if business partners retrospectively make corrections or amendments, the interest on back payments of at least six percent are due annually. The German Federal Tax Court (BFH), overturning a previous ruling, just recently declared that invoice authorizations are retroactive to the time of the original issuance and therefore the Tax Office may not impose back payment interest. However in their ruling of October 20, 2016, (Ref. No. V R 26/15) the highest financial court also made it unmistakably clear that a bill is only valid as a legitimate invoice if the following information is provided:

  • the invoicer and the service recipient,
  • the specification of services,
  • the remuneration and
  • the separately identified value added tax.

However, not all the information listed in the German value-added tax law (§ 14 Para. 4 UStG) has to be included in a single invoice for invoice receipt verification, which will also be indispensible in the future. Rather, incoming invoices may consist of several documents which together include all of the necessary mandatory components. For the applicable taxation of sales, for example, a reference on delivery notes on which, along with the date of the delivery note, the date of actual delivery is visible, is enough. As a rule, a documented comparison for completeness correctness of the services performed (for example, via the orders), even in later audits, is not a problem – but the explicit checking of tax numbers or VAT identification numbers of German business partners does. The tax offices have also recognized this and have granted protection of confidence in the German Value-Added Tax Code Application Decree (Section 15.2a Para. 6 UStAE). If one of the two invoice details is incorrect and the contractor was not able to recognize that, the input tax reduction remains.

Furthermore, the complete sequence of issued invoice numbers is by no means mandatory, even if the German Principles of Orderly Accounting and Storage of Accounts, Drawings and Documents in Electronic Form and for Data Access (GoBD) dated November 14, 2014 – (Ref No..: IV A – 4 – S 0316/13/10003) obligate the company to gap and double allocation analysis. In fact, invoice numbers may consist of several series of numbers and letters; even combinations of numbers and letters are permitted according to the German Value-Added Tax Code Application Decree (Section 14.5 Para. 10 S. 2 – 4 UStAE).


The CJEU reacted quickly in favor of the affected companies, and the postal address as the sender details was approved as sufficient for the input tax deduction.

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The problem of master data maintenance

But care is needed. Tax offices and courts are much less generous if other invoice details are missing or incorrect. As several current rulings demonstrate, this is particularly true for the correct identification of the service recipient and a precise description of the service. Thus, with the support of the Baden-Württemberg Tax Court, tax offices may reject retroactive changes if invoices do not include the complete name and address of the service recipient (ruling of March 23, 2017, Ref. no.: 1 K 3704/15). In the underlying circumstances, the information “Cargo List Name Location GmbH” or “Cash Sale” were used in part in the address field of the invoices for a service recipient with three customer numbers. With that, the errors in master data maintenance which are so common in operating practice come home to roost, in the input tax deduction at the latest.

But recently, extreme care has also been called for in the description of the service, which has always been eyed critically in audit cases. Even the Court of Justice of the European Union (CJEU) requires a description from which the type of service performed is apparent, thus allowing the tax offices to verify the legitimacy of the input tax deduction. However, detailed listings are not permitted. Rather, it is sufficient for the CJEU if additional documents with the required information are provided to the tax offices (ruling of September 15, 2016, Case C-516/14 Barlis). But take care. Formulations such as “Performance of legal services to the present day” are rejected by European courts because the specific date of the beginning of the service is not specified.

It is otherwise with deliveries. In the past, due to a lack of legal regulations, the principle applied that extensive descriptions could be dropped for goods of low value and meticulous item identifiers were needed only for valuable delivery items. But following the decision by the Hessian Tax Court of January 23, 2018 (Ref. No.: 1 K 2402/14), this practice-oriented handling may be at an end, if the German Federal Tax Court does not reach another opinion in the appeal proceedings (pending under Ref. No.: XI R 2/18). Otherwise, large-scale retail in the low-price segment may also require a sufficient service description. In any case, vague descriptions such as “var. costume jewelry” were not sufficient in for the tax judges in this case, because without other identifiers this prevented a clear determination of the delivery by the tax offices with limited effort.

Complete address or accommodation address?

On the other hand, the all-clear has been sounded for an accommodation address with only the company’s postal address. In 2015, an address at which no business activities occurred at the time of the invoice was not sufficient for the input tax deduction according to the German Federal Tax Court. Therefore, the highest German tax court sent two preliminary ruling references to the CJEU for final clarification of the requirements. The background for the requests was not least because the opinion that the classification of the business address as an accommodation address is difficult, if not impossible, for service recipients in some cases. The CJEU reacted quickly in favor of the affected companies, and the postal address as the sender details was approved as sufficient for the input tax deduction (ruling of November 15, 2017, Case C-374/16, Geissel and C-375/16, Butin). The understandable reason is that the performing company can also be identified by the tax offices through an accommodation address with the name and VAT identification number, and the actual reporting of the VAT amounts owed can be checked.

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About Bernhard Lindgens
At the Federal Central Tax Office, Bernhard Lindgens is primarily responsible for combating fraud and works as a specialist author in the fields of tax law, accounting and tax compliance for Handelsblatt Fachmedien, among others.
Bernhard Lindgens
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