German Tax Court Clarifies VAT Rules for Business Transfers

The German Federal Fiscal Court (BFH) has clarified critical aspects of value-added tax (VAT) treatment for business transfers through three rulings issued in April 2026. These decisions address situations where the sale of a business or a distinct operational part is involved, determining whether the transaction qualifies as a VAT-exempt transfer of a going concern or a series of taxable individual supplies.

Under German VAT law, the transfer of an entire business or a distinct part of it as a going concern is generally not a taxable event. However, this exemption applies only if the acquirer continues the business activity. If the transaction consists of multiple individual supplies, these are typically subject to VAT.

In one case, a company that operated a fish farm and processing business sold parts of its assets, including real estate and equipment, to two individuals. These individuals did not directly operate the fish farm themselves but leased the entire operation to a separate company. The BFH ruled that this did not constitute a VAT-exempt transfer of a going concern because the acquirers did not themselves continue the business operations; they acted as intermediaries.

In two other cases involving solar parks, companies sold the solar modules but retained central infrastructure like transformer stations and grid connection points. The acquiring companies did not enter into their own power purchase agreements but supplied the generated electricity back to the selling companies, which then fed it into the grid and collected the remuneration. The BFH determined that these were not VAT-exempt transfers of a going concern but rather a series of taxable electricity supply transactions. The court emphasized that the continuation of the business activity must be by the acquirer directly.

These rulings provide crucial guidance for businesses undertaking mergers, acquisitions, or asset sales in Germany. They underscore the importance of structuring transactions carefully to ensure compliance with VAT regulations and avoid unintended tax liabilities, particularly concerning the definition and continuation of business activities by the acquirer.