If the tax office becomes aware of incorrect or incomplete incoming invoices and reduces the input tax deduction, these invoices can usually be corrected.
Entrepreneurs can correct invoices they have issued themselves at any time within the limitation period. Invoices received from third parties can only be corrected by them. Entrepreneurs who received erroneous invoices should encourage the issuer of the invoice to correct the invoice in order not to suffer any tax disadvantages.
When can input VAT deduction be claimed?
In this context, the decisive point in time is the point in time at which input VAT deduction can be claimed. If the reduction of input VAT deduction takes place after years, corresponding interest on arrears per year can lead to high costs. There is a risk that the right to deduct input VAT only exists from the time of the correction.
If the VAT statement in the original invoice is justified and this is subsequently corrected, the invoice correction often has retroactive effect to the date of the original invoice.
According to the ECJ and the Federal Fiscal Court, it depends on the nature of the missing information whether the input VAT deduction is valid in the year of origin, even if the adjustment is only made years later. This means that interest charges are eliminated in the event of retroactive invoice adjustments. In this case, however, the original invoice must meet the requirements for a retroactively correctable invoice.
The original invoice must contain the following minimum information:
- Invoice issuer,
- Beneficiaries
- Specifications
- Remuneration and
- Separately stated VAT
Insofar as these minimum details are included, the invoice correction leads to retroactive consideration in the year of origin. Effective changes are therefore only possible if the invoice contains this minimum information. If only part of the information is missing, the invoice can be corrected, but not with effect for the past.
Requirements for an effective retroactive invoice correction
This year, the Federal Fiscal Court ruled that the cancellation and reissue of an invoice are also considered invoice corrections and can constitute an effective invoice correction with retroactive effect.
For a permissible retroactive effect, it is crucial that
- the original invoice contains missing or incorrect information,
- a correction is made by cancelling the original invoice and issuing a new invoice,
- the newly issued invoice also has a reference to the correcting invoice.
Missing or incorrect information can also be supplemented in the form of an additional document. This must also be able to be assigned to the original invoice.
Outsource invoice receipt processing and invoice correction
A possible input VAT deduction associated with a proper invoice can be retroactively waived retroactively in the event of an incorrect correction of an invoice and may be associated with interest on arrears. Competent support is offered at this point by a specialized accounting service. From the recording and checking of invoices to the control and monitoring of the approval and approval process as well as the timely payment of invoices to the processing of reminders, tasks can be taken over. In the form of outtasking or outsourcing, outsourcing partners for accounting processes assure companies of professional accounts payable management .
Result
With the Federal Fiscal Court ruling in 2020, companies can achieve effective retroactive invoice correction by cancelling and reissuing invoices. There is no longer a risk that the cancellation will retroactively remove the effect of the original invoice, but that the right to deduct input VAT will only exist at the time of reissue.
However, before cancelling, it must be ensured that it is actually necessary for the purposes of input VAT deduction. If a correction is not necessary because the right to deduct input VAT already existed, it may be retroactive, which may result in interest on arrears.
How much effort do you incur as a result of invoice corrections? Are you already using professional support in accounts payable? We look forward to your comments.
Image source: iStock.com, Photographer: AndreyPopov
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