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Value Added Tax – The German Federal Ministry of Finance significantly expands the range of services for real estate subject to VAT in Germany

This means that numerous services in connection with German real estate to foreign service recipients will in future be subject to German value-added tax at a rate of 19%. On 5 December 2017, the Federal Ministry of Finance (BMF) published a letter extending the catalogue of services relating to real estate in accordance with Section 3a (3) No. 1 UStG by the following:
  • Drawing up a contract for the sale or purchase of a property (asset deal);
  • Negotiation of the contractual terms and conditions as well as related consulting services (e. g. financing advice, preparation of a due diligence);
  • Advice on a tax clause in a land transfer agreement;
  • Other advisory services in connection with a property (e. g. sale-and-leaseback contract, financing advice, etc.);
  • Conception and negotiation of rental and lease agreements for a certain piece of land;
  • Review of existing rental or lease agreements with regard to the change of ownership in the context of a transfer of land.

The determination of place of service depending to the location of the land plot is to be applied even if the underlying transaction, which leads to a legal change of the land plot, does not finally take place.

Services which are not closely related to a specific property or for which the property is not a central and indispensable part shall not be subject to the special provision of services pursuant to § 3a (3) No. 1 UStG. According to our practical experience includes in particular:

  • Advisory services in connection with the sale of shares of real estate companies (share deal);
  • Advice on acquisition structures of a transaction (asset deal, share deal);
  • Preparation of a general model lease agreement;
  • Examination of the legal conditions of a property. 

The BMF letter is to be applicable to all open cases.

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