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Senior Manager, German Indirect Tax
Certified Tax Advisor, Lawyer, Director, National Office Tax & Legal
Senior Consultant, National Office Tax & Legal
If a business or a separately managed operation is sold or otherwise transferred as a whole, it must be determined for VAT purposes whether this constitutes a sale of a business as a whole within the meaning of Section 1 (1a) of the German Value-Added Tax Act (UStG) or a series of individual transactions: A sale of a business as a whole constitutes a non-taxable transaction, whereas individual services are taxable and, in principle, also subject to tax. In three decisions dated November 13, 2025, the German Federal Fiscal Court (BFH) resolved disputed issues regarding this classification and established key criteria for the distinction.
In one case (case no. V R 3/23), a GmbH & Co. KG originally operated a fish farm and processing business, including a farm shop and a restaurant. It sold portions of its business assets - specifically parcels of land with restaurant, retail, and residential buildings, concrete tanks, and movable equipment - to two individuals in equal shares. In addition, it transferred various rights to them, such as the water rights permit for operating the fish farm. However, the two purchasers did not subsequently operate the fish farm themselves but instead leased the entire facility - including the buildings and the rights transferred to them - with a time lag to a GmbH in which they held shares alongside other partners. The GmbH continued to operate the fish farm.
In the other two cases (case no. V R 32/24 and case no. V R 33/24), a GmbH & Co. KG operates a solar park in each instance. They feed the electricity produced there into a grid operator’s network on the basis of a grid connection and feed-in agreement and receive the remuneration provided for under the Renewable Energy Sources Act in return. Later, they sell all solar modules, including the respective individual infrastructure, to various other companies. However, certain central facilities of the plant, such as transformer stations and grid connection points, remain part of the GmbH & Co. KG’s corporate assets. The acquiring companies (sub-KGs) do not have their own feed-in agreements, especially since, due to new legal regulations, they would have been able to conclude such agreements only on terms less favourable than those of the GmbH & Co. KG. Instead, the sub-KGs supply the electricity they generate exclusively to the GmbH & Co. KG, which feeds it into the grid using the central infrastructure that remains under its control and continues to receive the corresponding remuneration for doing so.
In both cases, the BFH rejects the concept of a sale of the business as a whole and instead assumes a multitude of taxable individual transactions. The rationale in each case is that, for a sale of the business as a whole to be non-taxable, the purchasers would have to continue operating the business and thus take the place of the seller for VAT purposes.
In the case of fish farming, this is not continued by the purchasers, but by the purchasers’ tenant. Even though the continuation of business operations required for a sale of the business as a whole is not a strictly personal criterion, the continuation must be carried out by a transferee and thus by a person who, in principle, is also capable of terminating and winding up the business operations. It is true that in so-called “pass-through acquisitions” (chain transfers), the only relevant factor is whether the final acquirer continues the business. However, a lessee who merely continues the business is considered a non-acquirer and thus does not form part of the transfer chain.
In the cases of the two solar parks, the BFH does acknowledge that a purchaser may continue an operation transferred to them without the seller completely ceasing its business activities. However, if the seller continues its economic activity essentially unchanged, this does not constitute a continuation of that activity by the purchaser. The economic activity of the selling GmbH & Co. KG is essentially characterized by the feed-in activity, which determines its value both before and after the sale and which the respective purchasers have specifically not taken over. Therefore, the selling GmbH & Co. KG continues its economic activity itself, meaning that the requirement for a transfer of the business is not met.
With this reasoning regarding solar parks, the BFH indirectly reaffirms its previous case law that the sale of a leased property does not constitute a sale of a business as a whole if the seller continues to lease the property after the transfer, now as a sublessee: Even in such cases, there is a taxable, albeit generally tax-exempt, supply of real property, since it is not the purchaser but the seller who continues the original leasing business (decision of July 3, 2024, case no. V R 12/13).
Notice:
The legal interpretation confirmed by these rulings is particularly relevant in cases where the purchaser carries out tax-exempt transactions. Since input tax credits are not available for such transactions, it makes a significant financial difference whether a transaction is treated for VAT purposes as a sale of the business as a whole or as a series of individual services. Accordingly, careful consideration must be given to whether the continuation of the business by a lessee rather than by the purchaser, or whether the continuation of the value-determining business activities by the seller rather than by the purchaser, also makes economic sense from a post-tax perspective.