What is Vorsteuer?

Vorsteuer (input VAT) is the mechanism by which VAT becomes a tax on final consumer spending rather than a tax on business-to-business transactions. A VAT-registered business charges output USt on its sales and reclaims Vorsteuer on its purchases — the net remitted to the Finanzamt is only the value-added at that stage of the supply chain.\n\n**Conditions for Vorsteuer deduction**\nTo reclaim Vorsteuer, a business must:\n1. Be registered for Umsatzsteuer (Kleinunternehmer cannot reclaim)\n2. Hold a valid Rechnung (invoice) meeting §14 UStG requirements\n3. Have received the supply (goods delivered or service performed)\n4. Use the supply for its own taxable business activities\n\nA valid §14 UStG invoice must include: full name and address of supplier and recipient, supplier's USt-IdNr. (VAT ID) or Steuernummer, invoice date and consecutive number, description of goods/services, quantity, net amount, USt rate and amount, and gross total.\n\n**Invoice requirements and common pitfalls**\nSome common Vorsteuer denial scenarios:\n- Missing Rechnungsnummer (invoice number) on a simplified receipt\n- Wrong address on the invoice (must match the registered company address)\n- Supplier's USt-IdNr. cannot be verified\n- Invoice is in a foreign currency without a reference to the EUR exchange rate\n- Receipt from a petrol station that only shows amount paid — need a proper invoice issued to the company for refuelling costs above €250\n\n**Simplified receipts (Kleinbetragsrechnung)**\nFor invoices up to €250 gross, a simplified receipt is sufficient without the full §14 details. This covers everyday business expenses like taxi fares, low-value purchases, and canteen meals.\n\n**Pro-rata Vorsteuer (§15 Abs. 4 UStG)**\nWhere a business makes both taxable and exempt supplies (e.g., a property company that rents both commercial and residential), Vorsteuer must be split proportionally. Vorsteuer attributable to exempt supplies cannot be claimed.\n\n**Vorsteuer refund**\nIf input VAT exceeds output VAT in a period (common for new businesses or those making large capital purchases), the Finanzamt issues a Vorsteuererstattung (refund). This is processed via the standard Voranmeldung — there is no separate refund claim process. The Finanzamt typically processes refunds within 6–8 weeks of the Voranmeldung, though it may request supporting documentation for large refunds.