The depreciation calculation is orientated on the original acquisition price of the building. Therefore the parties generally prearrange the purchase price for land and building to increase the value of the building and thus raise the possible depreciation.

According to the decision of the German Federal Tax Court (IX R 12/14) the contractual agreement is still decisive for the allocation of the purchase price regarding land and buildings. However this is not the case if the allocated price was unrelated to market value or an abusive structuring took place. Yet, a significant discrepancy of the agreed price to land value guidelines just indicates and does not deem that the price is unrelated to the market value. Therefore, the tax office has to vet first further circumstances to assume an unrelated market value or an abusive structuring and may only afterwards estimate a different purchase price. German Federal Ministry of Finance had joined the dispute and had argued that reasonable doubts shall arise if the agreed purchase price is set 10 % higher than in the expert’s report or in the guideline of the fiscal authority. In case of a proceeding the tax court has to determine all facts regarding the value of the building and vet whether the allocated price was justified.

Apparently in reaction to the decision of the German Federal Tax Court the German Federal Ministry of Finance has updated the instruction and the guidelines for the proper calculation of the purchase price. Furthermore, the German Federal Ministry of Finance has provided an xls-file where the appropriate purchase price for land and building can be calculated and determined.