The German Federal Fiscal Court ruled in July 2025 that input VAT on renovation costs for a historic castle is deductible when the property is intended for taxable rental activities, regardless of whether the renovation was financed through grants or donations. The ruling confirms that profitability is not required for taxable person status.
Yes, the German Federal Fiscal Court confirmed that input VAT on renovation costs is deductible when the property is intended for taxable rental activities such as guest accommodations, events, or museum space.
No, the court ruled that how acquisitions are funded (whether through donations or grants) does not affect input VAT deductibility—only the intended use of the property matters.
No, the BFH confirmed that a typical market-oriented act as a taxable person remains valid even in case of losses, meaning profitability is not required for VAT purposes.
The ruling emphasises that comprehensive documentation of intended taxable use at the time of acquisition is essential for securing input VAT deductions.
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KMLZ · about 2 hours ago
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KMLZ · 3 days ago
The BFH ruling confirms that input tax can be deducted for the renovation of a historic castle even when financed by public grants and private donations, provided there is an entrepreneurial intent to generate taxable rental income. The decision clarifies that financing does not affect deduction, requires a clear allocation between private and taxable use, and mandates that the tax office determine the exact deductible share.
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