BGH ruling: Landlords must account for sales tax in operating costs!

BGH ruling: Landlords must account for sales tax in operating costs!

A recent ruling by the Federal Court of Justice (BGH) has significant implications for sales tax liability when renting out special property within condominium communities (WEG). Landlords of special commercial property are allowed to take over gross amounts from the operating costs bill, provided the community of apartment owners has not opted for sales tax. This ensures that the billing is also correct for tax purposes, especially when it comes to reclaiming operating costs.

In this specific case, a tenant of a hairdressing salon demanded reimbursement of operating costs. The rental agreement stipulated that the tenant had to pay all additional costs as well as the applicable VAT of 19%. However, the landlord who had opted for sales tax had to take into account the requirements of the WEG, which had not opted for sales tax. This led to a dispute about the amounts stated in the operating cost statement and their tax share. The BGH decided that the landlord's billing was correct because he had no obligation to deduct the sales tax.

Clarification about the sales tax option

The BGH's decision clarifies the complex regulations on sales tax in apartment buildings. In principle, the rental of real estate is exempt from VAT in accordance with Section 4 No. 12a UStG, unless the landlord opts to pay VAT, which was the case in this case because the tenant is considered an entrepreneur. This is a crucial point because the WEG itself is viewed as an entrepreneur as it provides services to the apartment owners in accordance with Section 4 No. 13 UStG. This regulation does not allow input tax deduction for the WEG unless it provides services subject to VAT, such as repairs or the supply of self-generated electricity.

The tax aspects of a WEG are challenging overall. While advance VAT returns are generally not required, the WEG must pay VAT if the annual turnover is over EUR 17,500. Apartment owners, on the other hand, can claim an input tax deduction if the apartments are used for business or are rented out subject to VAT.

Relevance for homeowners' associations

In practice, it is crucial that the WEG passes a majority resolution on the sales tax option in advance at an owners' meeting. Otherwise, the owners are not automatically entitled to a VAT statement. In addition, proper invoices must be issued in order to claim the input tax deduction.

It is therefore advisable for owners of special property to obtain comprehensive information about the options and obligations with regard to sales tax. This is the only way they can correctly perceive their claims and obligations and act in a timely manner, especially with regard to possible income taxes or the feed-in of electricity from combined heat and power plants and photovoltaic systems.

The BGH ruling of January 15, 2025 with file number XII ZR 29/24 is an example of the need for precise and legally secure processing when billing operating costs in owner associations. The challenges that arise from the different tax options are diverse and require careful consideration and planning in order to avoid legal disputes.

For further information on the regulations of the WEG and the associated sales tax issues, it is recommended to consult relevant specialist sources such as Haufe and GKK Partners to consult.