Only entrepreneurs are entitled to deduct input tax. The entitlement of the entrepreneur to deduct input tax does not require that he performs deliveries or other services in Germany or that he has his seat or a permanent establishment in Germany. Therefore, foreign entrepreneurs without domestic sales can have input tax reimbursed in a special procedure and to a certain extent (so-called input tax reimbursement procedure).
However, input taxes can only be deducted if they relate to sales that are intended for the company. Taxes charged to an entrepreneur for an item that he uses exclusively for private purposes (e.g. private television set) are therefore excluded from input tax deduction. If an asset (e.g. a computer) is used for both business and private purposes, the entire input tax can be deducted, but private use is subject to sales tax as a free value transfer. The input tax deduction from acquisition, rent and operating costs for vehicles that are also used by sole proprietorships and partnerships for non-business purposes is limited to 50 percent. At the same time, there is no sales tax for private use. Entrepreneur, those who make sales that are exempt from sales tax cannot deduct the input tax charged to them. Taking the help of the online tax services is important.
An exception to this applies to intra-Community deliveries and exports to non-EU countries. The exemption of intra-Community deliveries and exports with the granting of input tax deduction ensures that export goods cross the border without any VAT burden. This measure is necessary in the interest of the competitiveness of our products on the world market and corresponds to the principle of destination that is fundamentally applicable within the EU, according to which goods are subject to sales tax in the country of consumption.
For the Other Services
Certain other services relating to objects of import, export or transit are also exempt, provided that the input tax deduction is granted, as well as certain sales for shipping and aviation. Entrepreneurs who carry out both taxable sales and tax-free sales without input tax deduction must divide their input tax into deductible and non-deductible amounts. The entrepreneur is generally liable for tax. According to the definition of the law, an entrepreneur is someone who carries out a commercial or professional activity independently.
Anyone who carries out a commercial or professional activity independently
The entrepreneur has to submit a pre-notification within 10 days after the end of each calendar quarter, in which he must himself calculate the tax for the past calendar quarter (pre-registration period). He has to pay the calculated amount as an advance payment to the tax office. For larger companies there is a monthly pre-registration period. For entrepreneurs who start their professional or commercial activity, there is also a monthly pre-registration period in the current and following calendar year.