Understanding VAT (Umsatzsteuer) · 2.2

What Is Input Tax?

Short answer

Vorsteuer (input tax) is the Umsatzsteuer (VAT) that your company pays on its purchases. You deduct it from the VAT you charge your customers, thereby reclaiming it from the tax office.

Key points

Three prerequisites must be met:

Your company is an entrepreneur and not a Kleinunternehmer (small business owner).
The service or supply is for the business.
You have a proper invoice.

You can deduct it as soon as the service or delivery has taken place and the invoice is present, even if you have not yet paid. No deduction is available for exclusively tax-exempt transactions. If a mandatory detail is missing from the invoice, have it corrected, otherwise the deduction is at risk.

Figures & thresholds (as of November 2026)

Business entertainment: Input tax is fully deductible if reasonable and documented, even though only 70% counts as a Betriebsausgabe (operating expense)
From 01.01.2028: For invoices from suppliers who are themselves cash-basis taxpayers (Ist-Versteuerer), the deduction is only possible upon payment

Legal basis

§ 15 UStG§ 14 UStG

Continue

Next video: What is the Umsatzsteuer-Zahllast (VAT payable)?
Related: What Must Be on an Invoice? Mandatory Details

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