Germany: VAT Trap for Foreign Real Estate Investors During Vacancy

The CJEU’s Titanium ruling held that a rented property without the owner’s own staff does not by itself create a fixed establishment for VAT purposes.
German tax guidance still tends to treat foreign owners of German property used for taxable leasing as established in Germany, creating a conflict between case law and administrative practice.
In the reported case, a Luxembourg property company left its German building vacant for refurbishment and claimed input VAT on refurbishment costs in German VAT returns, but the local tax office pushed it toward the cross-border VAT refund procedure instead of processing the returns.
The mismatch created procedural risk over which filing route and deadlines applied; the taxpayer protected itself by obtaining Luxembourg VAT registration and forcing appealable action from the German tax office.
The German tax office ultimately processed the German advance returns and allowed the input VAT in full, highlighting the cash-flow and litigation risks foreign real estate investors can face during vacancy or refurbishment periods.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.