GlossaryEN1 min readUpdated: Jun 19, 2026

prohibition of input tax deduction

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Last updated: 19 June 2026Published: 27 January 2026

Source: https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Umsatzsteuer/Vorsteuerabzug.html

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Definition & Explanation

The prohibition of input tax deduction goes beyond a mere reduction: it completely bars a business from crediting VAT paid on specific purchases against its output tax liability, making that VAT a definitive cost. Statutory prohibitions typically cover expenditure lacking a business nexus, entertainment costs, or supplies used exclusively for exempt activities. In freight forwarding and customs operations, the prohibition commonly applies to vehicles used for non-business purposes or to hospitality expenses. It is distinct from an input VAT deduction restriction, which results in a proportional reduction only, and from a voluntary decision not to claim an otherwise allowable deduction.

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prohibition of input tax deduction

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Related Terms

Right to deduct input tax

restriction/limitation of the right to deduct input tax (VAT)

denial of input tax refund

Transfer of input tax credit entitlement

input tax mechanism

Input VAT deduction

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