Time limit for allocation option for mixed-use items

EU law does not stand in the way of a cut-off period for the allocation of mixed-use items, even if the Federal Fiscal Court has yet to clarify its proportionality.

If an item is used for both business and non-business purposes, the entrepreneur can allocate the item in its entirety to the business for VAT purposes, leave it in its entirety as private assets or allocate it to the business assets to the extent of its actual business use. The decision within the scope of this allocation option must be documented in a timely manner, but at the latest within the scope of the annual VAT return. Following a referral ruling by the German Federal Fiscal Court, the European Court of Justice (ECJ) has now decided that EU law does not in principle stand in the way of this preclusive period for a possible input tax deduction laid down in national law. However, the Federal Fiscal Court must now examine whether the preclusion period is proportionate. According to the ECJ ruling, it should take into account that tax offices can also impose sanctions on a negligent taxpayer that are less detrimental to the principle of neutrality than the complete denial of the right to deduct input tax.