German VAT net expanded to include new range of services
A fresh note from lawyers Pinsent Masons in Germany highlights a new roster of real estate services that have recently been brought into the VAT net.
Tax experts Werner Geisselmeier and Veit Kachelmann from the law firm point out in a note to clients that the German Finance Ministry has significantly expanded the range of services now subject to 19% VAT in Germany, with effect from December 5th 2017.
In the communication from the Finance Ministry, the following services are now classed as "services relating to real estate" under section 3(a)3 Nr. 1 of the German Sales Tax Law (UstG):
- 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 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 authors say the determination of 'place of service' as the location of the land plot is to be applied even if the underlying transaction leading to a legal change in relation to the land plot does not ultimately take place.
Services which are not closely related to a specific property, or for which the property is not a central and indispensable part, are not subject to the special provision of services set out in section 3a (3) No. 1 UStG. In the authors' experience, unrelated services include:
- 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.
In Germany, Pinsent Masons has offices in Düsseldorf and Munich.