Company seeks clarification on VAT treatment for earnest money deposits in property auctions.
Company’s Interpretation of Earnest Money
The company explained that it considers the earnest money paid by the auction winner as part of the sale price on the day the contract is signed. In a request for interpretation, they clarified that if the winner refuses to sign the contract, the earnest money is forfeited to the company.
If the contract isn’t signed due to the seller’s fault or without fault of either party, the earnest money is returned. The company believes that only upon signing the sales contract does the earnest money transform into part of the payment for the property, and thus VAT tax obligation arises at that moment.
Legal Connection to Property Supply
The earnest money is in strict connection with the supply of real estate.
