If A grants B an option for €50,000 to purchase his undeveloped field in two years time for an agreed price, the option is exempt from VAT because the sale of undeveloped land is exempt from VAT.
Conversely, if the option was granted over a new property, the €50,000 would be subject to VAT at the rate applicable to the sale of the property at the reduced rate.
Where an option is granted to purchase a property and the option is exercisable outside of the 5/2 year period, the treatment of the option depends on the wording in the option agreement.
If the option agreement specifies that the joint option for taxation will be exercised, then the granting of the option is subject to VAT at the reduced rate (on the basis that the sale, when it occurs, will be subject to VAT). In such cases, the supply of the option is not subject to the reverse charge.
If, however, the option agreement does not specify that the joint option for taxation will be exercised, then the granting of the option is exempt from VAT.