Belgium: VAT deduction for publicity and brokerage costs of real estate developers (CJEU judgment)

Belgium: VAT deduction for publicity, brokerage costs

The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning the deduction for value added tax (VAT) purposes on publicity costs and brokerage costs incurred by developers in the context of split sales of real estate.


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The case is: Vos Aannemingen BVBA v. Belgische Staat (C-405/19, 1 October 2020). Read the CJEU judgment


It is a common practice for a project developer to build residential real estate (apartments) on land belonging to a third party. Traditionally, the developer would obtain a right to build the apartments through a “building right” that is granted with regard to the land. Ultimately, the project developer will sell the newly constructed apartments subject to VAT (at a rate of 21%), and the land owner will sell the “land shares” with application of the proportional registration tax. For the buyers of these apartments, this split structure is commercially interesting because the rates of the registration tax are much lower than the standard VAT rate.

In this context, the developer often incurs extensive publicity, administrative, and brokerage expenses of which the developer usually deducts the amount of VAT in full. However, the Belgian VAT administration took the position that the VAT deduction on this type of costs is limited because these expenses also benefited the “exempt” sales of the land shares. In some situations, the right to deduct VAT was calculated on the basis of a fraction, with the value of the structure being the numerator and the value of the structure plus the value of the land being the denominator.

Hence, these issues were referred to the CJEU for clarification. 

CJEU judgment

The CJEU found that when a project developer incurs substantial expenses and there is a direct and immediate link between these expenditures and the developer’s overall economic activity, the VAT related these expenses are fully deductible when the benefit to the landowner from these expenses is secondary to developer’s needs. The CJEU assumed that these expenses are “general costs” that cannot be attributed to specific actions.

If the expenses are attributable to specific outgoing actions performed by both the developer and the land owner, then a limit on the deduction would be applied. If, on the other hand, these expenses are exclusively attributed to specific outgoing actions of the developer, the CJEU concluded that (despite the fact that these expenses also benefit the land owner) there would be no limit on the deduction.

The CJEU noted it was for the referring court to determine to what extent the services at issue have actually been provided in order to enable the developer to conduct its taxable transactions (sale of new buildings). The assessment of whether or not such a limitation would apply is to be made on the basis of all the circumstances. The CJEU stated that the fact that the developer can pass on part of these expenses to the owner of the land does not necessarily mean that a deduction restriction would apply.

Read an October 2020 report (Dutch) prepared by the KPMG member firm in Belgium

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