Netherlands: Transfers of real property qualified as transfers of going concern for VAT purposes (court decisions)
Court decisions on transfers of real property as transfers of going concern for VAT purposes
Decisions on transfers of real property as transfers of going concern for VAT purposes
The Arnhem-Leeuwarden Court of Appeals held in two recent cases—seemingly contrary to an earlier decision of 2018—that transfers of real property leased by a developer for a short term qualified as transfers of a going concern for value added tax (VAT) purposes.
In both cases, the property had been leased on a VAT-exempt basis. As a result of these decisions, the VAT due on the transfers of the property is limited to the non-recoverable VAT on the renovation costs, land costs, if any, and additional costs, rather than the non-recoverable VAT on the purchase price.
KPMG observation
The Arnhem-Leeuwarden Court of Appeals found in both cases that the real property was used to carry on an independent economic activity (i.e., operating (leasing) a building) and thus constituted an ongoing concern. However, the court did not specifically distinguish its earlier decision from 2018 in which it concluded that the property developer had not developed the building with a view to operating it itself, but rather with the aim of selling it. Thus, it is unclear why the court reached a different conclusion in these recent cases.
The Deputy Minister of Finance may still appeal these recent decisions to the Supreme Court.
Read a May 2022 report prepared by the KPMG member firm in the Netherlands
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.