The BFH ruling confirms that input tax can be deducted for the renovation of a historic castle even when financed by public grants and private donations, provided there is an entrepreneurial intent to generate taxable rental income. The decision clarifies that financing does not affect deduction, requires a clear allocation between private and taxable use, and mandates that the tax office determine the exact deductible share.
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Key Takeaways
The BFH states that financing via donations or subsidies does not affect the eligibility for input tax deduction.
Input tax is deductible if there is an entrepreneurial intent to generate taxable rental income, with a clear allocation between private use and taxable use, and the renovation is intended for taxable rental activities.
No, the BFH confirms that the lack of a profit motive does not preclude deduction; entrepreneurial activity is sufficient.
The tax office must determine the exact share of deductible input tax and any necessary adjustments if private use increases beyond the original plan.
Primary source
Read the full article at KMLZThis summary was published on VATfaqs.com on 10 January 2026. It relates to VAT developments in Germany. The original source is KMLZ.
