Apportionment of the Purchase Price in Real Estate Transactions
When purchasing a developed property, it is essential to correctly apportion the purchase price between the building (“depreciable”) and the land (“non-depreciable”).
This apportionment has tax implications, especially for depreciation (AfA – deduction for wear and tear).
Why Apportion the Purchase Price?
When acquiring real estate, the acquisition costs are split between building value and land value.
Only the building portion is eligible for depreciation under tax law (§ 7 para. 4–5b EStG). The land value is not subject to wear and tear and is therefore not depreciable.
An incorrect allocation leads to erroneous tax burdens – often resulting in lower depreciation.
Legal and Judicial Framework
BFH Jurisprudence
- Residual value method prohibited: On 10.10.2000 (Case IX R 86/97), the BFH ruled that the allocation must be based on the relative market values, not the residual method.
- Contractual apportionment accepted: According to the BFH (16.09.2015, IX R 12/14), the tax authority may reject notarial apportionments only if the values are economically unjustified.
Developments in Tax Courts
Tax courts have set clear limits for acceptable deviations:
- FG Berlin–Brandenburg: Deviations above 20% from the standard land value justify rejection (Ruling 20.03.2024, 3 K 3137/19)
- FG Munich: Deviations below 10% are considered harmless (10.04.2024, 12 K 861/19)
- FG Münster and Düsseldorf are critical of deviations of 30% or double expert values
BMF Tool – What Is It?
The Federal Ministry of Finance (BMF) provides a free Excel-based tool including a user guide (as of January 2025). It enables:
- Standardized apportionment using comparative, income or replacement value methods
- Plausibility checks of existing apportionments
- Step-by-step calculation instructions
Methods Used in the Tool
Comparative Value Method
For single/two-family homes or condos, if comparable price factors (e.g., €/m²) are available, land and building values can be derived accordingly.
Income Value Method
Used for rental properties or when no comparable values exist. As per § 28 ImmoWertV, this includes rental surplus, standard land value, interest rate, and construction costs.
Replacement Value Method
Used as a fallback (under §§ 35 ff. ImmoWertV), especially for mixed-use properties or where other data is lacking.
Step-by-Step Guide for Calculation
- Enter property data (address, size, year built, features)
- Input comparison factors/land value/interest rate
- Select method (comparative, income, or replacement)
- Calculate provisional values
- Determine share ratio and allocate total price:
- Building share = (Building value / Total value) × Purchase price
- Land share = (Land value / Total value) × Purchase price
Example Calculations
Example: Comparative Method
Data:
- Plot size: 1,200 m²
- Standard land value: €550/m²
- Living space: 120 m²
- Price per m²: €2,880
- Total purchase price: €600,000
Calculation:
Land value = 1,200 × 550 = €660,000 Building value = 120 × 2,880 = €345,600 Total = €1,005,600 Building share = 34.36% → €206,160 Land share = 65.64% → €393,840
Example: Replacement Value Method (Simplified)
- Standard construction cost: €1,800/m²
- Price index factor: 1.10
- Depreciation: (80 – 30)/80 = 62.5%
- Living space: 150 m²
- Land: 500 m², land value: €300/m²
- Total purchase price: €500,000
Calculation:
Building cost: 1,800 × 1.10 = €1,980/m² × 62.5% = €1,237.50/m² × 150 m² = €185,625 Land value = 500 × 300 = €150,000 Total = €335,625 Building share = 55.28% → €276,400 Land share = 44.72% → €223,600
Risks, Case Law & Criticism
- Tool under judicial review: FG Berlin–Brandenburg considers it generally suitable, but BFH case IX R 26/19 raised expert concerns (Jacoby 2020).
- Simplification vs. accuracy: The tool uses generalized assumptions, which may ignore regional specifics.
- Court review process: Deviations >20% from standard land values may trigger intervention by tax authorities or courts.
Practical Tips
- Include apportionment in the notarial contract (BFH 2015)
- Use current standard land values (public databases often available)
- If deviation >10–20%, consider a professional appraisal
- Use the BMF tool to check plausibility (CSV & Excel)
- Justify shares using the income or replacement method
Further Links
When in Doubt, Get an Appraisal
The apportionment ensures that only the depreciable building value is used for AfA. Lawmakers and courts require value-based methods. The BMF tool is helpful but does not replace a professional appraisal in unclear cases. To avoid tax disadvantages: define the apportionment in the notarial deed, use updated data, verify with the tool – and obtain an appraisal if necessary.