They are entrepreneurs and use an economic asset both for private use and for their entrepreneurial purposes. Then there is a so-called mixed-use economic good. This leads not only to income tax problems, but also to VAT problems. Consequently, one may wonder to what extent one is entitled to deduct input tax in the case of mixed use (§ 15 UStG). Furthermore, it is questionable whether the private use of operating assets is also burdened with sales tax.

The BFH has decided that the taxpayer can freely decide on the allocation of mixed-use assets. He therefore has the right to assignment. Of course, this does not help you if you do not know how to assign the mixed use meaningfully. We explain this to you in this article, in which the individual allocation options and their legal consequences are presented.

What is a sales tax organization?

1st mixed use

You can use an asset for purposes of providing taxable basic turnover, thus for business purposes and at the same time also for non-business purposes. For example, they can use a car both privately and for business trips and thus operationally. Once you use a mixed asset, the question of sales tax treatment arises. In particular, the deduction of input tax is based on the use for the company, since the turnover tax is only intended to burden the final consumption. Therefore, the question of the allocation of mixed uses arises. In this context, a distinction is first made between justifiable objects, other benefits and uniform objects.

1.1.

Deliveries of reasonable goods and other services shall be divided according to their use. This means that there is a distribution requirement for this type of service. Reasonable objects are movable objects according to § 91 BGB, such as coal, sand or gasoline, which are determined in traffic by number, measure or weight. Therefore, the articles must be economically divisible on the basis of external characteristics, according to objective criteria. A deduction of input control is then only possible in proportion. For example, in the case of services billed pro rata temporarily, such as rental or leasing, it is to be divided according to the period of use or according to the mileage.

1.2. Assignment Selection Right for Mixed Use

For a uniform item that cannot be divided by number, measure or weight neither real nor economic, you can choose how you want to assign the item. Consequently, you have two possible options under your assignment option. Therefore, you can either assign it altogether to your non-entrepreneurial field. You can also attribute it to the company as a whole. The ECJ has also ruled that in the case of economic goods (capital goods), as well as in the case of justifiable goods, the allocation can be proportional. So you can also choose an entrepreneurial assignment according to the determined extent.

Furthermore, it is important that you announce this assignment to the tax office and adequately document it. You can also implicitly do this by specifying the item in the VAT advance declaration and claiming the full VAT deduction. In addition, however, it should be noted that a business assignment is not possible if the delivered item is used less than 10% for the company (§ 15 I 2 UStG)

If you attribute the item completely to the company, you can also claim the full deduction of the initial or production costs. Consequently, however, you must tax the non-entrepreneurial use pro rata as a free impairment tax pursuant to § 3 IXa No. 1 UStG. The running costs are also in this case in principle only proportionally, according to the entrepreneurial use. However, if you have completely assigned the item to the company, you have the opportunity to claim the full amount of the input tax for the running costs. In order to do so, the VAT paid on current costs must have been included in the taxable amount of the ad valorem duty free of charge. If you take the item completely free of charge from the company assets by giving it away, you must tax the complete net purchase price as a free value withdrawal according to § 3 Ib UStG.

2.2. Private assignment of mixed use

If you have allocated the asset completely privately, you cannot claim a deduction of input tax with regard to acquisition costs and production costs. In return, however, you do not have to tax a free value tax. They may take account of the input tax on current costs in proportion to the business use.

2.3.

If you allocate the item, since it is economically or real divisible according to objective criteria, pro rata, you can claim the VAT deduction from the acquisition and from current maintenance only pro rata according to the business use. Therefore, you do not have to tax a non-contractual use as a free value tax according to § 3 IXa No. 1 UStG. Only if you have to completely remove the object They tax the part of the pro rata business use according to § 3 Ib UStG.

3. Restrictions on the right of assignment selection in the case of mixed use

The assignment selection right is restricted, for example, by § 15 Ib UStG. Thus, in the case of mixed-use properties, irrespective of their allocation, the deduction of input tax is granted only in proportion to the share of business use in the acquisition of the property. Subsequent changes are then to be taken into account by a time-proportional correction of the input tax deduction according to § 15a VIa, VIII 2 UStG. However, the taxation of the withdrawal of use is not applicable. However, if the share of business use is subsequently increased, de facto deduction of deposits is allowed by taking into account the higher business use in the adjustment of the deduction.

skillfully assigning mixed use

The advantage may be that you gain significant liquidity advantages through the initial full deduction with only time-proportionate withdrawal taxation of private use.