The Düsseldorf Fiscal Court had to decide under which conditions factoring services exist that entitle to input tax deduction.
Practical example:
The plaintiff purchased receivables from affiliated customers, assumed their collection and the debtor default risk and generated (VAT) taxable factoring fees. For refinancing purposes, it sold certain receivables to its Dutch sister company (B.V.). This was based on a receivables purchase agreement under which B.V. assumed the default risk and undertook to take dunning and legal action, as well as a separate service agreement under which B.V. transferred the actual collection of receivables, dunning and accounts receivable accounting back to the plaintiff.
The plaintiff treated B.V.'s services as taxable factoring services and claimed the full input tax deduction. However, the tax office was of the opinion that B.V. had not provided any factoring services due to the fact that it had not actually taken over the collection of the receivables. Rather, the plaintiff itself had carried out a tax-free transaction with receivables in accordance with Section 4 No. 8c UStG vis-à-vis B.V., which would have been tax-free in Germany. The tax office therefore reduced the input tax deduction from the input services on a pro rata basis according to the ratio of the receivables sold to the total portfolio.
The Düsseldorf Tax Court dismissed the claim. A collection service by the assignee required for factoring only exists if the assignee relieves the assignor of the actual collection of the receivables. In contrast, the mere acquisition of receivables by assuming the default risk without collecting the receivables itself is to be qualified as a tax-free transaction with receivables within the meaning of Section 4 no. 8c UStG.
The assignments of receivables are also not to be regarded as non-taxable provision of security. The tax court also denied the application of § 43 no. 1 UStDV as a simplification rule, as the assigned receivables were not based on the plaintiff's own transactions. The tax court considered the apportionment formula applied to be appropriate. However, the margin key applied by the plaintiff was not transferable to a factoring company.
Important: The judgment is not final. The tax court has Revision on the grounds of fundamental importance and for the further development of the law (concept of factoring). The appeal is now pending under case no. V R 47/25. In comparable cases, it therefore makes sense to keep the proceedings open until the BFH has ruled.