Cash flow advantage in the context of input tax deduction in Germany

In accordance with art. 15 (1) UStG (German Value Added Tax Act), two conditions must be met for a lawful deduction of input tax in Germany:

1. there is a proper invoice (art. 14 UStG) AND
   
2. the exchange of services between the provider of the service and the beneficiary has taken place.
   

To these two conditions the German tax office pays special attention, particularly in the case of subsequent tax audits.
An immediate payment of the invoice is not required. This also applies if the bill is settled later, according to agreement. This ruling applies to all entrepreneurs, irrespective of the method of determination of profits and the size of the enterprise.
If these two conditions are met, at that time the pre-tax claim must be asserted in the VAT advance declaration. A later deduction of input tax is no longer possible.

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Example:
As a service recipient, I ordered a machine and received it on December 20th, 2018. Payment for the machine for the 1st of February, 2019 has been agreed with the supplier. The input tax deduction from the invoice must be claimed in the VAT advance declaration for December 2018. This automatically results in a liquidity (cash flow) advantage, since the tax office will refund the input tax before the actual payment of the invoice.
This tax regulation is based on an EU regulation and applies throughout the European Union.

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