Germany: 232. ECJ Voids Exclusion of ITC (Ampafrance)

Last Updated: 20 July 2001
KPMG Germany Webpage
Click on the above link to visit the KPMG Germany webpage on the Mondaq website

For editorial cut-off date, disclaimer, and notice of copyright see end of this article.

1. Introductory

In its judgement of 19 September 2000, the European Court of Justice (ECJ) held that it is impermissible for the national law of a Member State to deny the input tax credit (ITC) on purchases of accommodations, food, hospitality, and entertainment (joined cases C-177/99 - Ampafrance and C-181/99 Sanofi Synthelabo, hereinafter collectively Ampafrance – IStR 2000, 655). The case decided involved the denial of an input tax deduction under French law. The French provisions are, however, comparable in most respects to the limitations on input tax deductions in force in Germany since 1 April 1999.

This judgement would appear to provide a legal basis for claiming an input tax deduction in situations in which the deduction is currently denied by the letter of German tax law. The judgement is relevant to various cases already pending before the German tax courts at the trial and appeals levels and should in our opinion also permit taxpayers to claim the input tax deduction retroactively.

Citing the Ampafrance decision, the Federal Tax Court has already voided certain provisions of German VAT law on the grounds that they are overridden by EU law (decision of 23 November 2000 - DStR 2001, 23 – see article no. 233.)

2. Ampafrance

2.1 The Ampafrance Decision

In its judgement of 19 September 2000 (Ampafrance S.A. et. al.), the ECJ invalidated the exclusions which France had introduced for input tax deductions on the cost of accommodations (lodging), food, hospitality, and entertainment on the authority of a decision by the European Council. The court held that the exclusions violated the Sixth EC Directive (VAT).

The ECJ holds that, by including cases in which the relevant expenditure is undoubtedly incurred for business purposes, a complete exclusion of the input tax deduction violates the principle that VAT should be neutral in its effects on business. Furthermore, as a measure to prevent tax evasion or avoidance, the exclusion is incompatible with the principle of proportionality. The European Council's authorisation of such exclusions was incapable of overriding these principles, the court stated.

There are no temporal limits on the application of the judgement. This means that the decision applies to all tax assessments that have not yet become final.

With Ampafrance, the ECJ decides a leading case in the taxpayer's favour on the issue of the compatibility of exclusions of input tax credits (deductions) under national law with the law of the European Union.

2.2. Significance Of The ECJ Judgement For German Law

The judgement of the European Court of Justice relates to French law. However, exclusions of the right to deduct input tax are also contained in § 15 of German VAT law as in force since 1 April 1999:

  • Exclusion of ITC on third party presents over DM 75, on third party restaurant expense, and on certain other "prestige" expenditure (§ 15 (1a) no. 1 UStG)
  • Exclusion for travel expenses (meals, accommodations, use of employee-owned vehicles – § 15 (1a) no. 2 UStG)
  • Exclusion for moving costs (§15 (1a) no. 3 UStG)
  • 50% exclusion for a company car where there is also private use exceeding 5% (§15 (1b) UStG)
  • Exclusion where business use of an asset is less than 10% (§ 15 (1) sent. 2 UStG)

The validity of all of the above total or partial exclusions of the right to deduct input tax is now doubtful because they rule out an input tax deduction as a matter of principle without giving the taxpayer the opportunity to prove that the expenditure was of a business nature. The tax authorities have already conceded the invalidity of § 15 (1a) no. 2 UStG with respect to meals and accommodations (see article no. 233).

It is true that the 10% limit in § 15 (1) UStG and the 50% exclusion of input tax deductions under § 15 (1b) UStG (which, according the statute's official explanation, is only supposed to apply to cars used by sole proprietors and partners in partnerships for private or other non-business purposes) are authorised by a decision of the European Council dated 28 February 2000. Such authorisation was, however, also present in Ampafrance. The ECJ disregarded the authorisation on the grounds that a complete denial of input tax deduction without opportunity to offer specific proof of business purpose was incompatible with the principle of proportionality. In our opinion, this must apply to the provisions of German law as well. The other exclusions of or limitations on the input tax deduction are not covered by the Council's authorisation. There is thus all the more reason to regard these provisions as incompatible with European law.

One may also argue in light of the ECJ decision that it was impermissible to repeal the input tax deductions on lump sums and standard amounts which were allowed under §§ 36 - 39 of the 1993 the VAT implementing regulations. However, we consider this view questionable since the relevant provisions of the VAT implementing regulations represented a simplification arrangement under national law which need not necessarily meet the standards of European law set forth above and may thus be withdrawn at any time.

Since the ECJ refused to limit the temporal effects of its judgement, the German provisions discussed above would be invalid from the time of their entry into force on 1 April 1999.

3. Recommendations

In light of the ECJ decision, we recommend that taxpayers claim a full input tax deduction with respect to the amounts referred to above. To the extent permitted by procedural law, this claim should be lodged for the entire period since the relevant provisions took effect.

We consider the chances of success dubious only with respect to the input tax deduction on lump sums and standard amounts. Here, a case by case decision should be made to determine whether it is worthwhile to file a claim to preserve the legal issue.

In filing an administrative appeal, care should be taken to request a stay of collection of assessed tax.

Taxpayers intending to claim a full input tax deduction on travel expenses should make sure that all invoices are or have been issued to the enterprise, not to an employee. The input tax deduction still requires invoices to name the employer as the recipient of the supply. An exception exists only for small invoices of up to DM 200 where it is not necessary to name the recipient of the supply (the business or entrepreneur).

Taxpayers holding invoices or statements for the period from 1 April 1999 to present in which the employee is designated as the recipient of the supply instead of the business (the entrepreneur), should – to the extent the invoice cannot be corrected and large sums are involved – consider requesting the tax authorities to permit the input tax deduction after the fact based on the principle of good faith dealing (§ 242 of the German Civil Code), if necessary on equitable grounds. In support of such a request, it may be argued that, by enacting a statute which conflicted with European Union law, the legislature prevented the business from having the invoices issued in its name. The tax authorities should therefore be estopped from objecting to the incorrect designation of the recipient of the supply, since such an objection would be a breach of good faith and in effect penalise the entrepreneur for having assumed the statute to be valid and failing to cause the invoices to be issued to the business.

If the input tax in question is claimed on quarterly or monthly VAT returns or on annual returns, we recommend calling the tax authorities' attention to this fact to avoid any risk of criminal prosecution.

It is presently unclear whether output tax must be paid for value conferred ("self-supplies"), e.g. on presents with net value in excess of DM 75, if a full input tax deduction is claimed on the input side in reliance on Ampafrance. In our estimation, output VAT does not arise in such cases. However, we once again recommend making this position clear to the tax authorities to avoid any risk of criminal implications.

Based on Ampafrance, the Federal Tax Court has already ruled in the taxpayer's favour with respect to travel expenditure for meals and lodging (see article 233). Appeals are pending before the Federal Tax Court which pose the issue of the exclusion of the input tax deduction on other grounds as well (e.g. the 50% exclusion for vehicles used partly for private and partly for business purposes). We expect the decision of the ECJ to influence the outcome of these proceedings.

Considering the frequently protracted nature of such litigation, taxpayers are urged to consult with tax counsel regarding steps to protect their legal rights regardless of the outcome of these proceedings, e.g. by filing an immediate claim for all related input tax, including claims for past periods where necessary.

Editorial cut-off date: 05 June 2001

Disclaimer and notice of copyright

This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. KPMG Germany in particular insists that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note that the article is current only through its editorial cut-off date shown immediately above (not to be confused with the later date as of which the article was placed online – the date appearing at the article's outset). Related developments subsequent to the editorial cut-off are not necessarily reported on in later articles. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While KPMG Germany's articles are carefully reviewed, it can accept no responsibility in the event of any inaccuracy or omission. Any claims nevertheless raised against KPMG Germany on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Germany (KPMG Deutsche Treuhand-Gesellschaft AG). No use of or quotation from the article is permitted without full attribution to KPMG Germany and the article's stated author(s), if any. Distribution to third persons is prohibited without the express written consent of KPMG Germany in advance.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.