Property letting - Merely owning property does not establish residency in Germany
Foreign business owners are not already deemed to be resident in Germany because of a let property. A lawsuit was brought by a real estate company, which was resident in Italy, that owned property located in Germany with retail premises that were leased out. However, in the land register, the company itself had not been entered as the owner, but instead its four shareholders.
In a case that was recently decided by a tax court, a property was under court receivership between 2008 and 2017. During this period, the official receiver concluded lease agreements on his own behalf, although for the account of the shareholders, and he opted to charge VAT. In 2017, after the receivership was completed, the claimant was entered in the land register as the owner. The local tax office determined the VAT for the claimant for 2020 and 2021. The tax office argued that the claimant was bound by the lease agreements that had been previously concluded until new agreements are made. The claimant argued that it was not aware that the option to charge VAT had been exercised because it did not have the agreements. At the start of the relevant year, the claimant had moreover expressly revoked the waiver of tax exemption.
The Münster tax court, in its ruling of 29.10.2024 (case reference: 15 K 399/23 U) decided that the claimant had not become liable to pay the VAT. The lease agreements had been concluded during the receivership in the name of the shareholders that, at that time, were considered to be the owners. Once the receivership had been completed, the shareholders had entered into the lease agreements by operation of law. The local tax office was also not able to provide evidence that the agreements had subsequently changed over to the claimant company, even though it had been entered in the land register as the owner after the receivership had been completed. In 2020 and 2021, the relevant years, neither had a separate joint ownership association existed that could have been deemed to be the business owner for VAT purposes. Therefore the claimant had not been providing a taxable service and did not owe any VAT.
