Even if a reverse charge real estate purchase has not been declared, input VAT must be adjusted - BFH ruling V R 33/18

In its ruling of 1 February 2022 (published on 27 May 2022, V R 33/18), Germany’s Federal Fiscal Court (BFH) ruled that anyone who does not properly declare the taxable acquisition of real estate as a reverse charge transaction and neither enters the output VAT nor the input VAT in the preliminary VAT return must nevertheless make input VAT adjustments in accordance with § 15a of the German VAT Code (UStG).

Case background

According to § 4 No. 9 lit. a UStG, the sale of real estate is generally exempt from VAT. However, if the purchaser intends to use the property for taxable output transactions, the seller will generally waive the tax exemption pursuant to § 9 UStG or, in other words, opt for VAT. This shifts the tax liability to the buyer pursuant to § 13b (2) No. 3 in conjunction with (5) sentence 1 UStG. The buyer must include this purchase as a reverse charge transaction in the preliminary VAT return and can then claim an input VAT deduction for the same amount so that there is no payment burden in this respect. However, the correction obligation under § 15a also applies to this input VAT deduction: If the purchaser uses the real estate differently than originally intended within a ten-year correction period, he or she must correct the input VAT deducted on the acquisition.

BFH case: purchase of real estate was not declared

In the case underlying the BFH ruling, a predecessor company of the plaintiff had purchased real estate that it intended to use for taxable output sales at the time of acquisition to the extent of 71.41%. The seller had opted for VAT in this amount. The predecessor company did not record the acquisition of this property in its preliminary VAT return - neither the reverse charge input turnover nor the corresponding input tax amount. The predecessor company was later merged into the plaintiff so that the real estate became the property of the plaintiff, and it entered the ten-year correction period that had already begun.

Within the ten-year correction period, the plaintiff changed the use of the real estate and initially rented it out subject to VAT at a rate of only 27.7% and later completely exempt from VAT. The tax office therefore assessed an input tax adjustment in accordance with § 15a UStG. The plaintiff contested this, arguing that an adjustment pursuant to § 15a requires that an input VAT deduction had originally been claimed. However, this was not the case as the predecessor company had not included the property acquisition in its preliminary VAT return. The appeal and action were unsuccessful.

BFH decision:  Declaring both or not declaring both makes no difference

The BFH ruled that an original input VAT deduction had been made, even if the purchase of the property had not been declared. According to § 157 para. 1 sentence 2 of the General Fiscal Code (AO), the assessed tax is the only decisive factor in this case. Whether something had been entered in the declaration form under "Input VAT from § 13b (...)", however, only affected the taxation bases on which the assessed tax was based. Because the VAT and input VAT cancel each other out in reverse charge transactions, it makes no difference whether both are properly declared or whether both are not declared. Thus, the non-declaration of VAT and input VAT also constitutes a claimed input VAT deduction. Therefore, the plaintiff had to accept an adjustment in accordance with § 15a UStG.


The BFH's decision is not surprising.

The "original input VAT deduction" within the meaning of § 15a UStG would only be missing if the purchaser declared the output VAT but did not claim the corresponding input VAT deduction. Any other assessment would contradict the VAT system.

(Dated: 14 June 2022)