The German Ministry of Finance clarified rules on input VAT deductions for subsidized service providers that operate at persistent loss. The BMF Letter states that such providers cannot deduct input VAT for services unrelated to taxable activity and must satisfy a two‑step test linking remuneration to performance and confirming economic activity. The letter also amends the VAT Application Decree.
The MOF clarified that these providers cannot deduct input VAT for services unrelated to taxable activity and must satisfy a two‑step test linking remuneration to performance and confirming economic activity.
On Jan. 20, 2026, via BMF Letter No. COO.7005.100.4.13831037.
First, determine a direct link between remuneration and performance; second, confirm the existence of economic activity.
Yes, it amends the VAT Application Decree.
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