Acquisition of real estate - VAT transfer options

When acquiring a property as an asset deal, it is worth examining the various transfer options in detail from a VAT perspective.

Various transmission options are available, which are described below.

Without VAT / Excluded

In principle, the transfer of overbuilt real estate is a service exempt from VAT. If nothing is stipulated in the contract or the seller is not subject to VAT, the acquisition of the property is VAT-exempt or exempt from VAT. VAT can therefore be disregarded for such asset deals. A transfer of a property (excluding construction work) that is used exclusively for residential purposes is always an exempt supply.

Opted / partially opted

In this case, at least the seller is liable for VAT and the purchase of the property is voluntarily subject to VAT. The basis for calculating the VAT is the sales price attributable to the opted part of the building (excluding the value of the land, as this does not form the basis for calculating VAT). The seller must then pay the VAT and passes this on to the purchaser. Provided the purchaser is entitled to deduct input tax, he can reclaim the VAT passed on to him as input tax from the FTA in the following quarterly statement. Until then, the liquidity remains tied up. In the event of a subsequent change of use due to a reduction in the option rate, the own use is generally based on the input tax claimed on the purchase price.

Reporting procedure

A transfer of a property using the notification procedure is possible for contracting parties subject to VAT. The purchaser takes the place of the seller. The seller reports the transaction to the FTA instead of passing on or paying the VAT to the purchaser. Both contracting parties must sign a notification form (No. 764). For the reporting procedure, there must be complete documentation of the input tax claimed over the last 20 years of the property. The purchaser therefore bears the risk of the documentation obligation, as well as the obligation to provide evidence of the correspondingly applied option or input tax rates. In the event of a subsequent change of use due to a reduction in the option rate, own use is only calculated on the basis of the current value of the value-enhancing investments or major renovations at that time.

Conclusion

It is advisable to consider the VAT consequences in detail for each transaction and to factor the possible consequences into the purchase price.

An indemnification clause in the contract can at best reduce the consequences. However, it should be noted that the consequences of a revision could occur up to 25 years later and the clause may no longer be enforceable.