The predecessor's taxes: liability under section 75 AO and the transfer of a going concern

A pastry chef buys an established bakery with two branches for €180,000, effective 1 April 2026. In the autumn he receives a liability notice for €14,500 of wage tax and VAT that the previous owner failed to pay over in 2025. The purchase agreement says the seller bears all old liabilities alone. The tax office relies on the statute anyway, and the contract only helps the buyer against the seller.

When the acquirer answers for someone else's taxes

As a rule, everyone owes their own taxes. The German Fiscal Code (Abgabenordnung, AO) makes an exception for the purchase of an entire business. Section 75(1) sentence 1 AO makes the acquirer liable for certain taxes of the predecessor when a business, or a separately run unit of a business, is transferred as a whole.

The reason is plain. The business assets are often the only tangible security for taxes that arise from the business. If they move to the buyer, the tax authorities should not be left empty-handed merely because the seller has spent the purchase price or can no longer be reached.

The provision covers two situations. The whole business may be transferred, such as a sole trader's complete craft workshop. But a unit run separately within the structure of a business is enough too, meaning a part that stands on its own organisationally, like a branch managed independently with its own bookkeeping.

The statute says "übereignet", transferred in ownership. What is meant is the passing of ownership of what makes up the business, not a mere rental. Someone who only leases a business acquires no ownership; whether a transfer as a whole nonetheless exists in a given case is a matter of overall assessment that this course does not prejudge.

The price does not matter. Section 75 AO attaches to the act of transfer, not to consideration, and unlike commercial law it allows no exclusion by agreement. A clause stating that the seller bears all taxes up to the closing date therefore binds only the contracting parties between themselves.

Section 75(2) AO expressly excludes two kinds of acquisition: acquisitions from an insolvency estate and acquisitions in enforcement proceedings. Someone who buys a business from the insolvency administrator is therefore not liable under this provision for the insolvent predecessor's tax arrears.

Which taxes the acquirer takes on

Not every tax of the seller moves across. Section 75(1) sentence 1 AO covers two groups: taxes whose liability is based on running the business, and tax withholding amounts. Under sentence 3, claims for repayment of tax refunds are treated like taxes as well, meaning amounts that were paid out wrongly.

A tax is business-related when its trigger depends on the business. That is true of VAT, which the trader owes on supplies and services. It is equally true of trade tax, because under section 2(1) of the Trade Tax Act (GewStG) every permanent commercial enterprise is subject to it, not a person.

Trade tax is administered by the municipality. But section 1(2) no. 2 AO declares the rules on tax debt law, which include the liability provisions, applicable accordingly to the real property and trade taxes. The municipality can therefore pursue the acquirer just as the tax office can for VAT.

Withholding amounts are above all the wage tax that the predecessor, as employer, had to deduct and pay over. If he paid out wages but did not pass the wage tax on to the tax office, that arrear hits the acquirer just like unpaid VAT, provided the time window fits.

The seller's income tax is not covered. Under section 1(1) of the Income Tax Act (EStG), natural persons are liable to income tax; the tax attaches to the person and their total income, not to the business. The same applies to the tax on the capital gain that the seller makes on the sale itself.

• VAT on the business's turnover: covered, because it depends on the business
• trade tax of the commercial enterprise: covered, via section 1(2) no. 2 AO also towards the municipality
• wage tax the predecessor had to pay over as employer: covered as a withholding amount
• tax refunds received wrongly: covered, treated like taxes
• the seller's income tax, including on the capital gain: not covered, it is personal

How the seller taxes his capital gain and which allowance he can claim for it belongs to his own income tax. The course on the tariff and extraordinary income explains this; a separate calculator shows how the allowance tapers off. For the buyer, only one thing matters: that tax stays with the seller.

The double time window of liability

Even within the covered taxes, the acquirer is not liable without limit into the past. Section 75(1) sentence 1 AO draws two time limits, and both must be met. The first concerns when the tax arose, the second the date by which it must be assessed or filed in a self-assessment return.

First limit: the tax must have arisen since the start of the last calendar year before the transfer. For a transfer in 2026, taxes that arose from 1 January 2025 onwards count. Older arrears, for instance from 2024, are not borne by the acquirer under this provision.

Section 38 AO says when a tax arises: as soon as the facts to which the law attaches the obligation are fulfilled. For VAT on agreed consideration, section 13(1) no. 1(a) of the VAT Act makes the tax arise when the return period covering the supply ends.

Wage tax arises under section 38(2) sentence 2 EStG at the moment the wages reach the employee. Trade tax arises under section 18 GewStG at the end of the assessment period, which under section 14 sentence 2 GewStG is the calendar year. Trade tax for 2025 therefore arose at the end of 31 December 2025.

Second limit: the tax must be assessed or filed by the end of one year after the acquirer registers the business. Whatever the tax office assesses only later, for instance after a tax audit of the seller, falls outside the liability, even if it arose in the right year.

Registering the business means the notification under section 138 AO that the acquirer makes as the new owner. Under section 138(4) AO it is due within one month of the event that must be reported. How to complete the tax registration questionnaire for this is explained in the guide to that form.

This link has a practical side. The one-year period only starts with the buyer's own registration; delaying it extends the window in which the predecessor's arrears can still be assessed and attributed to him. Registering on time is also self-protection.

Liable only with the assets taken over

The acquirer's liability is limited in its object. Section 75(1) sentence 2 AO confines it to the stock of assets taken over. The buyer does not risk the rest of his wealth, his private house or another business, but only what he received with the takeover.

This is not a euro cap that appears as a figure in the notice but a limit on what can be reached. The tax office can only turn to the assets taken over. If the buyer took over machines, stock and a customer base, those items form the frame of liability, however large the predecessor's arrears.

For the negotiation this leads to a sober conclusion. Someone who acquires a business for €180,000 can lose a substantial part of that value if the seller has large arrears. In effect the price is then paid twice: once to the seller and a second time, limited to what was taken over, to the tax authorities.

Because the liability cannot be excluded towards the tax office, buyers protect themselves between the parties. Common tools are information on tax arrears before signing, retaining part of the price and an indemnity clause. They do not prevent the liability, but they give the buyer recourse against the seller.

Liability notice and priority of enforcement

The tax office cannot simply demand payment from the acquirer. Anyone liable for a tax by law is pursued under section 191(1) AO through a liability notice. That notice is an administrative act open to objection; the deadlines for doing so are explained in the course on objections.

The notice has its own limitation period, four years as a rule under section 191(3) AO; the course on managing director liability covers it. For the acquirer, the shorter limit of section 75 AO applies alongside: only what is assessed within one year after registration can be the subject of his liability at all.

If the tax has not been assessed against the seller and can no longer be assessed because the period has expired, no liability notice may be issued under section 191(5) no. 1 AO. The same applies under no. 2 where the assessed tax is time-barred or has been waived. The liability shares the fate of the debt.

The acquirer also only has to pay once nothing can be recovered from the seller. Section 219 sentence 1 AO allows a payment demand to a liable party only insofar as enforcement against the tax debtor's movable property has failed or appears hopeless. The seller comes first in line.

The exceptions in section 219 sentence 2 AO concern liable parties who evaded or handled evaded taxes themselves, or who were legally obliged to withhold and pay over taxes. The acquirer, who only took over the business, was not the employer for the predecessor's wages. For him, enforcement against the seller therefore keeps its priority.

VAT: the transfer of a going concern

The purchase itself raises a second tax question. The seller supplies machines, goods and fittings, which would normally be taxable transactions. Section 1(1a) sentence 1 of the VAT Act (UStG) provides, however, that transactions within a transfer of a going concern to another trader for that trader's business are not subject to VAT.

Under sentence 2, a transfer of a going concern exists when a business or a separately run unit is transferred as a whole or contributed to a company, whether for consideration or free of charge. A gift of a business to a child who carries it on as a trader therefore also falls under the rule.

Two conditions sit on the buyer's side. The acquirer must be a trader, and must acquire the business for his own business. Someone who takes over a business only to resell the items individually or to use them privately does not meet this condition on the wording.

The consequence is not a zero rate but the absence of taxability. No VAT may therefore be shown on the invoice. The €180,000 price from the opening is then the whole price, with no surcharge and no input tax that the buyer would have to pre-finance and reclaim from the tax office.

The acquirer steps into the seller's shoes

Section 1(1a) sentence 3 UStG closes the rule with a short sentence: the acquiring trader takes the place of the seller. For VAT purposes the buyer continues the history of the assets taken over instead of starting it afresh. This matters above all for input tax deduction.

If the seller deducted input tax on a machine or a building, the adjustment period under section 15a UStG keeps running. Subsection 10 states expressly that the transfer of a going concern does not interrupt it. The seller must give the buyer the information the buyer needs for any later adjustment.

Under section 15a(1) UStG the period itself is five years from first use, ten years for land and buildings. How the adjustment is calculated year by year is shown in the course on input tax adjustment; a calculator handles the arithmetic. Here it is enough to know that the buyer inherits the remaining term.

In practice this means: if the buyer later uses a building taken over differently from the seller, for instance for exempt letting instead of taxable turnover, he must repay input tax that he never deducted himself. The seller's records on acquisition costs and start of use therefore belong in the purchase agreement.

If the seller mistakenly shows VAT although a transfer of a going concern exists, he owes the amount shown under section 14c(1) UStG. The buyer cannot deduct it as input tax, however, because section 15(1) sentence 1 no. 1 UStG only allows deduction of the tax legally owed for a supply.

The error can be corrected. For cases under section 1(1a) UStG, section 14c(1) sentence 3 UStG refers to the correction rules in subsection 2. The risk to tax revenue must have been removed, meaning no input tax was deducted by the recipient or it was repaid, and the correction must be applied for in writing at the tax office.

Trade tax also knows a consequence of the transfer. If a commercial enterprise passes as a whole to another trader, under section 2(5) GewStG it is treated as closed down by the previous trader and as newly founded by the acquirer, unless it is merged with an existing enterprise.