The German Federal Fiscal Court ruled in July 2025 that input VAT on renovation costs for a historic castle is deductible when the property is intended for taxable rental activities, regardless of whether the renovation was financed through grants or donations. The ruling confirms that profitability is not required for taxable person status.
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Key Takeaways
Yes, the German Federal Fiscal Court confirmed that input VAT on renovation costs is deductible when the property is intended for taxable rental activities such as guest accommodations, events, or museum space.
No, the court ruled that how acquisitions are funded (whether through donations or grants) does not affect input VAT deductibility—only the intended use of the property matters.
No, the BFH confirmed that a typical market-oriented act as a taxable person remains valid even in case of losses, meaning profitability is not required for VAT purposes.
The ruling emphasises that comprehensive documentation of intended taxable use at the time of acquisition is essential for securing input VAT deductions.
Primary source
Read the full article at KMLZThis summary was published on VATfaqs.com on 13 January 2026. It relates to VAT developments in Germany. The original source is KMLZ.
