Real Estate Transactions and Beneficial VAT Treatment – German Tax Authorities Clarify Conditions for an Effective VAT Option

Summary: In real estate asset deals between entrepreneurs, the purchaser seeks to reclaim the transaction-related VAT under the same conditions as the seller previously had. On the other hand, the seller wants to avoid any later correction of his previous VAT-input tax deductions. Therefore, the parties treat such a transaction as a non-VATable sale of the whole business under the German VAT Act (Geschäftsveräußerung im Ganzen). This treatment allows the purchaser to step into the footsteps of the seller and claim for a VAT input tax deduction for any consulting, legal or other fees in connection with such transactions.