VAT option

Nov 11, 2025

For security reasons, the parties should avoid making the option to pay sales tax contingent upon a condition precedent.

This can be achieved by not making the precautionary option subject to a condition within the meaning of Section 158 of the German Civil Code (BGB), but rather by declaring it to be an unconditional option in this sense in the notarized real estate purchase agreement.

Clauses according to which the option is declared “precautionary,” “alternative,” or “in the event” that the tax authorities do not treat the real estate purchase agreement within the meaning of Section 1 (1a) of the German Value Added Tax Act (UStG) should therefore be avoided. The following suggested wording contains a precautionary, unconditional option that has retroactive effect to the date of conclusion of the contract.

The parties assume that the sale of the business as a whole is not taxable pursuant to Section 1 (1a) UStG. As a precautionary measure, the seller hereby immediately and unconditionally opts for VAT liability on the sale of the property in accordance with Section 9 UStG in the event that it is not legally a sale of a business as a whole within the meaning of Section 1 (1a) UStG.

The parties assume that this is a non-taxable sale of the entire business in accordance with Section 1 (1a) of the German Value Added Tax Act (UStG). As a precautionary measure, the seller hereby opts immediately and unconditionally for VAT liability on the sale of the property in accordance with Section 9 UStG in the event that the transaction is not legally considered a sale of the entire business within the meaning of Section 1 (1a) UStG. Without prior consultation, the parties will not appeal against the refusal of input tax deduction by the buyer's tax office, which may do so on the grounds that the transaction is not a sale of the entire business.

In addition, the parties involved should disclose all information required by the tax office to determine the sales tax. This includes, in particular, the tax numbers of the parties involved and the net purchase price.

It should also be noted that the buyer is acquiring the property for his business. In addition, the reference to the transfer of tax liability to the recipient of the service required under Section 14a (5) sentence 1 UStG must be included in the contract (Zugmaier/Fietz, NWB 2013 p. 3746 [3748]).

The following wording is suggested in this regard:
"The seller issues a net invoice (Section 14a (5) sentence 2 UStG), as the tax liability is transferred to the buyer in accordance with Section 13b (2) No. 3 in conjunction with (5) sentence 1 UStG. The seller will therefore not collect the sales tax. The buyer's obligation to register and pay the applicable sales tax is based solely on the relevant tax regulations applicable to the buyer. The sales tax is not owed to the seller."