The BFH has ruled that a down payment invoice can also entitle the taxable person to deduct input VAT even if it does not expressly contain terms such as „down payment“ or „advance payment“. It is sufficient if it is clear from the circumstances that the invoice refers to a service still to be provided.
Practical example:
An entrepreneur exercised his right to deduct input VAT for a down payment he had made for a future delivery of a photovoltaic system. However, the photovoltaic system was never realized. As the delivery was ultimately not made, the question was whether the entrepreneur was entitled to deduct input VAT. The central question was whether the entrepreneur was entitled to deduct input VAT despite the fraudulent context.
For one of the invoices in question, the BFH recognized the right to deduct input VAT because it qualified as a down payment invoice. For the second invoice, however, the BFH ruled that further clarification was necessary in order to determine whether this invoice could be regarded as a down payment invoice.
The case was referred back to the lower court with regard to the second invoice in order to carry out further investigations. In particular, it must be examined whether the entrepreneur could assume in good faith at the time of payment that the service would actually be provided. The key point here is that the right to deduct input VAT for advance payments only applies if the taxable person assumed that he was making a payment for a future supply, which can be called into question in situations similar to fraud.