A sale of a business as a whole always occurs when the essential foundations of a business or a separately managed business are transferred in such a way that the acquiring entrepreneur can continue it without financial expenditure.
Tax consequences of the sale
According to § 1 para. 1a UStG (German law on VAT), this sale is not taxable, so it is mandatory to calculate the sale without VAT. Accordingly, there is an extreme risk potential for the parties involved: the seller has the risk, in the case of an erroneously assumed sale of the business as a whole, that he will have to pay the VAT including interest subsequently. If the acquirer – which is to be assumed in practice – has already deducted the input tax, interest will accrue for the acquirer upon repayment, as he had a pecuniary advantage until the time of repayment.
If, on the other hand, the seller did not recognize a sale of the business as a whole and therefore reported VAT on the turnover, the acquirer may not deduct input tax because there is no invoice with reported input tax.
Sense of the provision
Actually, the purpose of § 1 (1a) UStG is to facilitate the taxation or simplify the procedure of business transfers or the transfer of parts of businesses such as real estate, whereby both transfers for consideration and transfers free of charge are not taxable.
However, the standard raises many questions in connection with the disposal of leased or vacant real estate.
For example, a property developer or the like may also be a letting agent if a sustainable letting activity already existed at the time of the sale of the property. The rental activity must then be continued by the purchaser for it to be a sale of a business as a whole. In this case, the property developer is to be regarded as a rental entrepreneur.
However, if the activity is purely that of a property developer, there is no sale of a business as a whole. This is the case, for example, if the selling property developer constructs a building and seeks tenants or lessees for the corresponding rental property solely for the purpose of selling it after completion in order to increase income due to rentals that have already been made.
If it is not a sale of a business as a whole, the turnover tax exemption of § 4 no. 9a UStG applies, and it can be considered whether waiving the tax exemption according to § 9 para. 1 UStG makes sense.