Supreme Court clarifies VAT treatment sale-and-leaseback transactions
A sale and transfer of an immovable property by way of a sale-and-leaseback transaction should be considered as an ordinary transfer of real estate for VAT purposes. In a ruling published last Friday, the Dutch Supreme Court rejected the position that such a transaction should be ignored for VAT purposes.
The case concerned a foundation (stichting) for which an apartment building with dwellings and commercial spaces was realized. After completion of the construction, the foundation had rented out the units to a significant number of tenants. The building was then sold and transferred in a nearly fully let state within two years of its first use and leased back by the foundation for 25 years. The foundation did not remit any VAT in respect of this transfer. According to the Dutch Supreme Court, however, the transfer was taxed with VAT. In the view of the Court, the transfer in the case at hand does not qualify as a transfer of a going concern for VAT purposes, such as a transfer of a building in a let state which is generally not subject to VAT. In this case the VAT recovery right was limited as it concerned the letting of dwellings.
It is conceivable that there are situations in which a sale-and-leaseback transaction should be considered a financing transaction instead of a transfer of an immovable property for VAT purposes. The European Court of Justice has ruled accordingly in a case where the seller reserved a buy-back option at an exercise price far below market value.
Ruling (in Dutch): Hoge Raad 29 januari 2021, zaak 19/00699, ECLI:NL:HR:2021:154.
Luca van SilfhoutSenior associate Tax adviser
Luca is co-author of the book 'Building in the Netherlands’. This publication is intended to be a handy overview of the most important legal and tax facets of and for Dutch building and development practice.T: +31 20 578 52 92 M: +31 6 22 10 93 79 E: email@example.com