In its judgment of 27 June 2018 (case no. X R 44/16), the BFH recently ruled that VAT prepayments made within ten days after the end of the calendar year remain deductible in the previous year even if 10 January of the following year falls on a Saturday or Sunday. The BFH thereby takes a clear position against a general administrative instruction issued by the tax authorities.
Background: As a rule, business expenses must be deducted in the year in which they were paid. By way of exception, however, regularly recurring expenses, such as VAT prepayments, that are incurred shortly after the end of the calendar year may be allocated as business expenses to the calendar year to which they economically belong. A period of up to 10 days is recognised as a short period of time.
According to the new BFH ruling, the 10-day period may therefore exceptionally be exceeded if 10 January falls on a Saturday or Sunday. The next time this will occur is in January 2021.
Frequently asked questions
Frequently asked questions
Are VAT prepayments for December deductible in the old year if paid in January?
Yes. VAT prepayments qualify as regularly recurring expenses and can be allocated to the previous year as a business expense if they are paid within a short period after year-end. A short period is defined as up to 10 days after the end of the calendar year.
What applies if January 10 falls on a Saturday or Sunday?
According to the BFH ruling of 27.06.2018 (Az. X R 44/16), the tax deduction in the prior year remains possible even if payment is made on the next business day. In this case, the 10-day period may exceptionally be exceeded. With this decision, the BFH contradicts the previous position of the tax authorities.
What is the case reference of the BFH ruling on VAT prepayments at year-end?
The relevant landmark ruling by the BFH is dated 27 June 2018, case reference X R 44/16. It governs the temporal allocation of VAT prepayments made shortly after the turn of the year.
What are recurring expenses within the meaning of § 11 EStG?
Recurring expenses are payments made at regular intervals, such as rent, insurance premiums, or VAT prepayments. If they are paid within 10 days before or after the turn of the year, they are allocated for tax purposes to the year to which they economically belong, not to the year of actual payment.
When does January 10 fall on a weekend again?
For the first time again in January 2021. In this case, the BFH case law applies, meaning that VAT prepayments can still be allocated to the previous year even if paid only on the following business day.