Input tax deduction from services for private interests not possible

A GmbH is not entitled to deduct input tax from services that primarily serve the private interests of its managing director and his relatives.

Unsurprisingly, the Baden-Württemberg Fiscal Court has ruled that a corporation is not entitled to deduct input VAT from services which, according to their objective content, directly serve the private interests of its managing director and his wife and with which significant economic value has been transferred to them. It is irrelevant that the corporation may have indirectly aimed to strengthen the overall activity of the company or to strengthen the commitment and motivation of its managing director and employees. An input tax deduction would only be conceivable if the purchased input service does not go beyond what is necessary and indispensable to enable the company's own entrepreneurial activity, the benefit to the managing director or his wife is at most incidental and the costs of the input service are included in the price of the output turnover. This was not the case here.