Interest term for property developer cases
With its decision of September 27, 2018 (V R 49/17), the BFH issued the most recent ruling in a long series of so-called property developer cases. In essence, these cases concerned the question of whether the reverse charge mechanism pursuant to Section 13b UStG applied in the case of construction services received by property developers.
After the BFH had ruled that, contrary to the opinion of the tax authorities, this was only the case if the property developer also used these supplies to carry out construction services, the court recently also declared the hurdles set by the tax authorities for the reimbursement of unduly paid VAT to be unfounded.
After the BFH had ruled that, contrary to the opinion of the tax authorities, this was only the case if the property developer also used these supplies to carry out construction services, the court recently also declared the hurdles set by the tax authorities for the reimbursement of unduly paid VAT to be unfounded (as previously reported).
The Federal Court (FG) Baden-Württemberg has now issued an interesting decision regarding one of these old cases, in which the property developer applied for a reduction of the VAT assessed against him and in return assigned his claim under civil law for repayment of VAT against the construction firm assigned to the tax office. The tax office was therefore able to offset the two claims against each other.
However, there was a conflict between the taxpayer and the tax authorities regarding the start of the interest term. The tax authorities claimed that the assignment of the VAT claim was a retroactive event so that the interest term pursuant to Section 233a (2a) AO commenced 15 months after the end of the calendar year in which the retroactive event occurred. By contrast, the taxpayer was of the opinion that the interest term had started pursuant to the general principle outlined in Section 233a (2) AO, i.e. 15 months after the end of the calendar year in which the tax arose.
With its decision of December 7, 2017 (1 K 1293/17), the FG Baden-Württemberg upheld the taxpayer's argument. The plaintiff was therefore entitled to substantial interest refunds.
Due to the fundamental importance of the decision, the court allowed an appeal to the BFH. However, the appeal initially lodged by the tax authorities (XI R 4/18) has since been withdrawn. Therefore, for the time being there will be no decision by the BFH in this matter. Nevertheless, affected property developers could interpret the ruling of the FG Baden-Württemberg as an indication that an objection or claim brought in the fiscal court, to the effect that interest should start in accordance with Section 233a (2) AO, could succeed. In view of the current effective interest rate of 6% p.a. pursuant to Section 238 AO, this may result in a considerable advantage.
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