Modernisation and Digitalisation of Black Market Combat

The draft bill for the modernisation of black market combat includes a priority rule for the area key in the allocation of input tax for mixed-use properties. The German Chamber of Commerce and Industry (DIHK) highlights legal risks and practical implications for businesses.

With the draft bill on modernisation and digitalisation of black market combat, the legislature is also amending the VAT Act. For mixed-use properties, input tax is to be allocated primarily according to the ratio of usable areas. Other methods, such as the object-related turnover key, would only be permissible if they demonstrably result in a more precise economic allocation. The German Chamber of Commerce and Industry (DIHK) sees this as a departure from previous case law and points to possible legal uncertainties and practical disputes.

Key Points at a Glance

The draft bill proposes a change to the German Value Added Tax Act (UStG) relevant to companies.
It is planned to amend § 15 para. 4 of the UStG: Input tax deduction for mixed-use properties should primarily be allocated according to the area key.
Other allocation criteria (e.g., object-related sales key) will only be permissible if they produce more precise results.
This restriction contradicts the rulings of the Federal Fiscal Court, which allows companies to choose from several appropriate methods.
Deviations from the administration's principle will hardly be possible in the future; this increases legal uncertainty and creates potential for disputes.
The German Chamber of Commerce and Industry (DIHK) recommends refraining from adding § 15 para. 4 to the UStG.

Background

The draft adds § 15 (4) of the VAT Act, establishing the area key as the principle for input tax allocation in mixed-use properties. The Annual Tax Act 2024 has already clarified that the turnover key is to be applied when no other, more precise economic allocation is possible. However, according to case law from the Federal Fiscal Court (Ruling of 17.08.2001, Az. V R 1/01), companies have a choice between several appropriate allocation methods. The new precedence of the area key would effectively limit this freedom of choice. Additionally, it is expected that disputes with tax authorities will increase regarding the question of when an alternative method actually enables a more precise allocation.

What Businesses Need to Know

Review ongoing and planned property projects: Document input tax allocation to avoid future adjustments.
If an alternative method is to be used: Provide justifications and evidence for a more precise economic allocation carefully and in an audit-proof manner (e.g. reliable area data, usage profiles, object-related turnovers).
Early coordination with tax advisors and potentially the tax authorities: Update internal guidelines for input tax allocation and prepare for possible audits.
Consider the design of investments and contracts: Evaluate potential implications on lease, usage, and operator concepts as well as liquidity planning (input tax).

2025-07-15--FAQ-Schwarzarbeitsbekämpfung