You are an entrepreneur and are entitled to deduct input tax. You have also used the input tax deduction for an asset that you use for your company. In the future, however, the use of this economic asset will change. They may therefore have to adjust the deduction. It is also questionable whether you can also make the adjustment for the deduction if you first used a good for private use and then put it into your business, i.e. use it for business purposes. The central norm in connection with the correction of the VAT deduction is § 15a UStG. This contribution clarifies such issues as the adjustment of the deduction.

The purpose of the adjustment of the input tax deduction according to § 15a UStG is to determine the input tax deduction after the actual use of the input service. Input services are those services that the entrepreneur spends for the purpose of generating his (initial) turnover. It is therefore considered that the pre-declaration period during which the input turnover takes place should be the basis for the assessment of eligibility for deduction under the intention to use it. Consequently, an adjustment to the VAT deduction should in principle be made in the case of future cross-exclusion.

In order for the VAT deduction to be corrected, circumstances must have changed. Therefore, the necessary change of circumstances in all corrections of § 15a UStG is to be understood identically. In the context of the change, the circumstances at the time of actual use are decisive in relation to the original deduction. Thus, there is a change of circumstances if the actual use under Section 15 I, II UStG results in a higher or lower deduction of input tax compared to the original deduction. Consequently, there is a case of adjustment of the deduction where, in the case of a intended one-off use, any circumstances or case-law which govern the original deduction change.

§ 15a I UStG contains the system for the correction of the deduction of input tax on goods which are not used only once for the execution of transactions. Consequently, § 15a I UStG applies to fixed assets. Where, in the case of such goods, the conditions governing the initial deduction change within five years from the date of first use, an adjustment shall be made to the amounts of VAT attributable to the acquisition or production costs for each calendar year. In the case of immovable property, this period is regularly extended to ten years.

§ 15a II UStG contains the rules for the adjustment of the deduction of input tax in the case of goods which change circumstances which are used only once to carry out a transaction. Therefore, § 15a II UStG applies to working capital. Accordingly, if the circumstances governing the original deduction change, the adjustment must be made for the tax period during which the asset is used. The measure of the change in circumstances is only the intention to use in the calendar year of the benefit payment. Consequently, the adjustment requirement applies if, in the case of initially intended disposal for taxable purposes, the asset is now disposed of free of tax, contrary to that original intention of use. In the absence of such a provision, the adjustment can be made within an unlimited period. Therefore, the correction under § 15a II UStG differs in particular in this respect from the correction under § 15a I UStG for the fixed assets.

Adjustment of the deduction may be omitted. This is initially the case if the input tax on the acquisition costs or production costs of an economic good is a maximum of € 1,000. In addition, the adjustment is also not applicable if the circumstances have changed by less than 10 percentage points and the adjustment does not exceed EUR 1,000 in the calendar year.

If an asset is first used before the 16th of a calendar month, this calendar month shall be taken into account in full. Therefore, the adjustment period ends correspondingly earlier. However, the month is completely disregarded if the asset is used for the first time after the 15th of a month. Consequently, the adjustment period ends accordingly later.

If business assets are subsequently used for private purposes which exclude deduction of VAT, this is primarily a free use or a tax on value. In such a case, the requirements of § 3 Ib UStG or § 3IXa UStG must be examined. Therefore, the main application of § 15a UStG is the subsequent change of the use of a company object for deductible tax-free transactions or vice versa for transactions enabling the deduction of input tax. Consequently, the change in use is rarely a case of adjustment of the deduction. However, § 15a UStG applies to cases in which the private use part of a privately and operationally used economic good increases (§ 15 Ib UStG).

The tax code also knows correction standards with §§ 172 ff AO. It therefore appears questionable which of the correction standards or the correction standards apply. §§ 172 ff A0 apply if the deduction of input tax was illegal from the outset. It seems questionable whether § 15a UStG could apply after the expiry of the existing force. According to BFH, the adjustment of the input tax deduction is only possible if the misjudgement of the input tax deduction is based on § 15 II UStG. Consequently, Section 15a of the UStG is applicable if it has been erroneously assumed that taxable transactions are tax-free instead of actually present transactions.

In the case of a deposit, an asset is first used privately and then entrepreneurially. In principle, it should not be possible in this case to make an adjustment in the sense of a subsequent deduction. This is justified by the fact that the entrepreneur must already receive the service in his capacity as an entrepreneur. However, this contradicts the principle that only the final consumption should be burdened. Consequently, according to the most recent case-law of the ECJ, § 15a UStG applies in the case of the contribution if the entrepreneur subsequently claims that he has already received the relevant asset as an entrepreneur at the time when the benefit was received. Consequently, certain conditions must be met.

Therefore, it is necessary that the recipient already has entrepreneur status when receiving benefits. Furthermore, he must actually use the asset subsequently for the purposes of taxable initial turnover. In addition, he must not have explicitly excluded this use at the time of the service purchase. Therefore, in this context, the suitability of the article for business use and the ratio of the normal life to the duration of the temporary non-business use may be considered as indicative. In addition, the actual business use usually already shows that such an intention to use was not excluded from the outset.

If the current use of the asset in the company changes, a correction of the original VAT deduction is made in accordance with § 15a V UStG. In the case of sale of an asset, for example, a property, the correction according to § 15a IX UStG must be made for the entire time until the end of the correction period.