The invoice correction is retroactive

If an invoice for which input tax was claimed is subsequently corrected, the correction takes effect retroactively as of the invoice’s date of issuance. The Federal Fiscal Court (BFH) ruled on this in a recent decision (Case No. V R 26/15), thereby fundamentally changing its previous case law.

The plaintiff company claimed input tax for invoices from a lawyer and a management consultant. The descriptions of services on the invoices read “consulting fee” and “general business consulting,” respectively. During a tax audit, the tax office objected to the insufficient details regarding the services billed and denied the input tax deduction for the disputed invoices. The company filed a lawsuit against the tax office and submitted amended, properly formatted invoices during the proceedings.

ECJ Brings About Change in Case Law

The BFH’s decision was subsequently suspended because the European Court of Justice was examining whether the German rule—under which the correction of an invoice does not have retroactive effect to the date of issuance—is compatible with European law.
Ultimately, the judges ruled against the regulation previously in force in Germany. As a result, the BFH has now also changed its case law, meaning that the correction of an invoice will henceforth have retroactive effect to the date on which it was originally issued. This means that the right to deduct input tax can also be exercised for the year in which the invoices were originally issued, rather than only in the year of the correction.

Practical tip:
A document can now be corrected retroactively if it originally contained information regarding the issuer, the recipient, the description of services, the consideration, and the separately stated sales tax. A correction can be made up until the conclusion of the oral hearing in court.