No retroactive waiver of the VAT exemption on the sale of real estate - BNF ruling XI B 60/20

Background information:  Need to protect the buyer

Pursuant to § 9 (3) Sentence 2 of the German VAT Code (UStG), the waiver of the VAT exemption on the sale of real estate, which is in principle tax-exempt, can only be exercised in the notarised real estate purchase agreement. This is done to protect the purchaser, because waiving the VAT exemption transfers the tax liability to the purchaser in accordance with § 13b of the UStG. The obligation to notarise the waiver in the purchase contract is intended to protect the buyer from being caught off guard by this tax liability.

Facts of the case:  belated option

The plaintiff in the proceedings discussed here had sold real estate and in doing so had not declared a waiver of the tax exemption in the notarised contract. However, the buyer and seller later had a waiver notarised.

Arguments for non-admission appeal

The Financial Court of Hesse did not accept the belated waiver and did not allow an appeal to the BFH. The plaintiff appealed this decision to the BFH with a complaint of non-admission. He argued that he and the purchaser had, in fact, already agreed at the time the purchase contract was concluded that VAT would be opted for. Inadvertently, this was not included in the contract. Since he and the purchaser had agreed to the waiver, the purchaser did not have to be protected from a surprise tax liability under § 13b of the UStG. In addition, no tax loss would arise from the belated waiver. Moreover, the decision of the Financial Court of Hesse deviated, among other things, from the BFH decision XI R 22/19 of 2 July 2022 (our online article on this topic can be found here), so that the BFH must now allow the appeal, among other things, to ensure a uniform case law. The fundamental importance of the question also justifies the admission of the appeal.

Grounds for non-admission of the appeal

The BFH dismissed the appeal against non-admission as unfounded. There was no divergence from the decision XI R 22/19 (and another decision) because these decisions dealt with the reversal of the waiver, not with the belated waiver. The question of the admissibility of a belated waiver is also not of fundamental importance because it has already been decided by the highest court and therefore does not require clarification. In this respect, the BGH refers to its earlier case law, according to which a belated waiver is invalid even if it is also notarised. The reason:  With § 9 (3) sentence 2 of the UStG, the legislator intended to specify not only the form of the waiver, but also the point in time, which the BFH had already established in its earlier case law.

The plaintiff's argument that the parties to the real estate purchase agreement had already decided to use the waiver when concluding the notarised purchase agreement, which was merely not included in the agreement due to an oversight, likewise does not justify the admission of the appeal. This factual allegation does not correspond to the findings of the Financial Court of Hesse, and only the facts established by the court of first instance can be used as a basis in the appeal.

Practical implications

The BFH did not have to address the question of whether a waiver agreed orally between the parties to the purchase contract and subsequently notarised is effective. Such a situation could therefore occupy the Financial Courts again in the future. However, it seems unlikely that the BFH would declare such a waiver to be effective, meaning that strict care should still be taken when purchasing real estate to include the waiver immediately in the purchase agreement, which must be notarised.

(Dated: 7 June 2022)