The property developer contract combines the purchase of land and construction services in a single agreement. The tax treatment involves numerous particularities that buyers and investors should be aware of.
What Is a Property Developer Contract?
The property developer contract combines the acquisition of a plot of land with the construction of a building. The Makler- und Bauträgerverordnung (MaBV) governs the specific obligations, in particular the payment schedule pursuant to § 3 MaBV.
Real Estate Transfer Tax Treatment
Unified Object of Acquisition
Real estate transfer tax is levied on the entire purchase price including construction services. For a total price of 400,000 euros at a rate of 5.0 per cent: 20,000 euros in real estate transfer tax – including on the pure construction costs.
VAT Implications
Property Developer Privilege and § 13b UStG
The Federal Fiscal Court (BFH) has ruled that property developers do not qualify as recipients of services within the meaning of § 13b UStG if they do not themselves provide construction services.
Input Tax Deduction
Businesses entitled to deduct input tax can claim the input tax from the property developer contract for commercial properties where the VAT option has been exercised.
Income Tax Aspects
Depreciation Base
Depreciation covers all acquisition costs less the land component, including real estate transfer tax, notary and land registry fees, and financing costs up to completion.
Acquisition-Related Production Costs
The three-year period under § 6 Abs. 1 Nr. 1a EStG only begins upon acceptance of the completed building.
Payment Schedule and Tax Allocation
Instalment Payments under MaBV
The staged payments based on construction progress are allocated to the overall acquisition for tax purposes.
Timing of Transfer of Ownership
The relevant date for the commencement of depreciation is the transfer of possession, benefits and encumbrances, not the entry in the land register.
Special Considerations for Investment Properties
Pre-Completion Deductible Expenses
Financing costs during the construction phase are deductible as anticipated income-related expenses, provided the intention to let is documented.
Contract Structuring
Agree on Custom Features Separately
Separate contracts for custom features can offer advantages regarding real estate transfer tax.
List Fixtures Separately
Fitted kitchens and external installations should be listed separately – they are not subject to real estate transfer tax and can be depreciated independently.
Conclusion
Early tax advice before signing the contract can significantly reduce the tax burden. At compleneo, we support you from the investment review through to ongoing management.
