If there is a change in the use of property such that turnover ceases to be VAT-able and becomes VAT-exempt within a period of 10 years after the acquisition/renovation of the property, input VAT deducted must be repaid proportionally. This is also the case where property is sold within the 10-year period, as the sale of property is usually VAT-exempt, where no option to charge VAT has been exercised. However, no repayment is required if the sale is regarded as the transfer of a going concern. In this case, the purchaser steps into the seller’s shoes and takes over the VAT repayment obligation until the end of the 10-year period. The acquisition of a leased property, including the lease agreements, has hitherto been regarded as the transfer of a going concern. In its decision dated 30 April 2009, the Federal Tax Court confirmed that this is the correct treatment, even if parts of the property are not actually leased at the time of the transfer provided there was an intention to lease the vacant parts. In addition, the lower court of Düsseldorf expressed the view, in a decision dated 29 April 2009 that the same principles apply where part of a building is not used because of renovation/construction.
