close
Share with your friends

Germany: Sale and lease-back implications for input VAT

Germany: Sale and lease-back implications for input VAT

Depending on the specific structure of a contract and how it is actually implemented, a sale and lease-back transaction may consist of two separate transactions—a delivery and a return (as defined by Art. 3, para. 1 of the German VAT law (UStG)) or a lease-back as supply of services.

1000

Related content

Another possibility, according to guidance (3 February 2017) of the German Ministry of Finance (BMF), is a taxable service supplied by the lessor. For this treatment to apply, the primary focus of the sale and lease-back transaction must be to allow the lessee to enjoy favourable accounting treatment. In addition, the lessor must have provided a loan for the predominant share of the financing of the acquisition by the lessee.

Still, there may also be a single transaction by the lessor in the form of a tax-exempt loan (Art. 4 (8) (a) UStG)—pursuant to a judgment of the Court of Justice of the European Union (CJEU). Although the sale and lease-back transaction is tax-exempt, the CJEU concluded that a building does not require an input tax correction. The CJEU case concerns a Belgian company (taxpayer) that owned several buildings. The taxpayer fully deducted the Belgian taxes shown on the invoices for construction, remodeling or renovation measures as input tax. The taxpayer executed sale and lease-back transactions with two financial institutions in order to increase its liquidity.

Other developments

Other recent value added tax (VAT) developments that may affect businesses in Germany include the following items:

  • Substantive conditions for a zero-rated export (CJEU judgment of 28 March 2019 ‒ case C-275/18 ‒ Milan Vinš)
  • Place of provision of services in relation to seminars (CJEU judgment of 13 March 2019 – case C-647/17 – Srf konsulterna)
  • Correction of inaccurate application of law in the case of property developers (German Federal Tax Court judgment of 23 January 2019, XI R 21/17)


Read an April 2019 report [PDF 279 KB] prepared by the KPMG member firm in Germany.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

Request for proposal