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06 December 2019 / article

No supply subject to VAT in case of sale-and-leaseback

The Court of Appeal of The Hague has ruled that the sale-and-leaseback of a retirement housing complex does not constitute a transfer of immovable property for VAT purposes, since none of the transactions carried out by the vendor is intended to give the buyer the power to be the owner of that property.

Growing Money (3)

A housing association supplied a partially let retirement housing complex to a buyer, where the buyer undertook to let it to the vendor (sale-and-leaseback). In the deed of transfer, the buyer and the vendor have assumed that no VAT is payable on the sale, because it concerns a totality of assets within the meaning of Article 37d of the Turnover Tax Act 1968 (Wet op de omzetbelasting 1968). However, the tax inspector is of the opinion that VAT is due and imposed an additional tax assessment.

Question of law

The question is whether or not VAT is due on this sale-and-leaseback.

Assessment by the Court of Appeal

The District Court ruled earlier that the transfer of the complex constitutes a totality of assets within the meaning of Article 37d of the Turnover Tax Act 1968 and that no VAT is therefore payable. The Court of Appeal of The Hague also ruled that no VAT was due, but used a different reasoning to arrive at this decision. The Court of Appeal ruled that the parties did not intend the power to dispose of the property as the owner to pass to the buyer. This therefore does not constitute a transaction subject to VAT.

Practical implications

A sale-and-leaseback real estate transaction usually involves the transfer of real estate. In this case, there is no totality of assets, as no lease agreements are transferred. The Court of Appeal's reasoning that this is not a transfer is therefore new and we expect that this will lead to subsequent proceedings. In a Belgian case published after this ruling, the European Court of Justice arrived at a similar opinion on sale-and-leaseback.

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