Daily Tax Report: International

Tax Deductions Must Change When Transactions Change: EU Court

July 9, 2020, 2:45 PM

Businesses whose economic activities include both taxed and tax-exempt transactions must adjust the initial value-added-tax deductions when changes occur to the type of transactions made, the European Court of Justice ruled.

Germany’s federal finance court had sought a preliminary ruling for a case involving the Bad Neuenahr-Ahrweiler tax office and “HF,” a company operating a retirement home—a tax-exempt activity in Germany—about the adjustment of deductions of VAT paid on the construction of a cafeteria annexed to the residence.

The company had initially stated that only taxable transactions would take place in the...

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