Foreign VAT on an invoice: deduct, reclaim or request a correction?

Case 1: hotel accommodation in Austria

A German company pays €1,100 for business accommodation in Austria. The valid hotel invoice contains €1,000 net accommodation and €100 Austrian VAT. Assume a wholly business trip, no private share and no special travel-margin arrangement.

The German input-VAT deduction from that €100 is zero. The accommodation is connected with the property in Austria; it is not reclassified as an ordinary German B2B service just because the customer is a German business.

For this worked case, assume the Austrian refund conditions and application requirements are met and the €100 claim is recoverable. The accounting separates €1,000 travel expense and a €100 foreign tax receivable against the €1,100 payment. When the refund arrives, bank increases by €100 and the receivable clears. There is no second expense reduction if the recoverable amount was already recorded separately.

If the tax is not recoverable, its accounting treatment must instead reflect that cost. Do not create a receivable solely because a refund application is possible.

German businesses use the applicable EU refund procedure through the German administration. The BZSt’s procedure description and Austria’s official refund guidance explain the route and conditions. A separate claim register helps track country, year, invoices, amount, deadline and decision.

Case 2: an Irish supplier provides business software

An Irish supplier provides an ordinary software service to a German taxable business for €600. The recipient is established in Germany, no relevant German supplier establishment participates, and no special place-of-supply rule applies.

Under the general B2B rule, the service is taxable in Germany. The recipient accounts for €114 VAT at 19% under reverse charge. With full input-VAT entitlement in this example, €114 is also deductible under the relevant reverse-charge provisions.

The supplier receives €600. The books contain €600 software expense, €600 payable and the two €114 tax positions. Payment clears the supplier payable. The foreign supplier address does not turn the transaction into foreign input VAT.

See §3a UStG, §13b UStG and §15 UStG.

Case 3: the same software invoice incorrectly includes foreign VAT

Now assume the same €600 service was mistakenly invoiced with €138 Irish VAT, totalling €738, because the supplier used the wrong customer classification.

The €138 is not deductible as German input VAT. Request a corrected invoice using the established business and transaction facts. For this example, the supplier accepts the correction, replaces the invoice with €600 and refunds the already-paid €138.

The final records should show:

The foreign tax correction does not remove a German reverse-charge obligation that arose from the service. Determine its proper reporting period independently; do not wait for a supplier reply if that would leave the German treatment unaddressed.

Make the conclusion reusable

Record the legal supplier, actual service, recipient, place-of-supply conclusion, tax country, deduction or refund route and supporting invoice. Keep these facts with the case. A short note such as “Austria accommodation; €100 foreign refund receivable; no German input VAT” is more useful than “foreign invoice checked.”

Hans can extract country and tax details, connect the evidence and apply supported VAT treatment. The professional conclusion still needs the actual transaction facts. Neither an AI label nor a prior invoice from the same supplier settles a changed service.

For currency differences, see foreign-currency invoices and payments. For the monthly tax balance, see output VAT and input VAT.