ECJ Case C‑17/18 (Mailat – Apcom Select) – Judgment – Lease of restaurant; TOGC

On 19 December 2018, the European Court of Justice gave its judgment in case C‑17/18 (Mailat – Apcom Select). The case concerns the question if the lease of a restaurant can qualify as the transfer of a business.

Unofficial translation

Facts (simplified):

Apcom Select, managed by Mr. and Mrs. Mailat, received investment works in a building in which it operated a restaurant. Apcom Select deducted the input VAT incurred on this work as well as for the fixed assets and the property related to the operation of the said restaurant.

At the same time, Apcom Select entered into a lease agreement with another commercial company under the VAT exemption scheme for the building in question and on the capital and property related to the operation of the restaurant. The tenant continued the commercial operation of the restaurant under the same name.

At the time of the conclusion of the said contract, Mr and Mrs Mailat did make any VAT adjustment on the deducted VAT for the work carried out as well as for the fixed assets and the goods related to the operation of the restaurant, even though, under national regulations, they had the obligation to do so.

It is in that context that Mr and Mrs Mailat, as well as Apcom Select, were criminally prosecuted by the national anti-corruption authority for tax evasion before the national court.

In the present case, Mr and Mrs Mailat submit that, through Apcom Select, they leased the immovable in which they operated a restaurant, including capital goods and those related to them. They argued that they supplied the operation of the restaurant to another commercial company, and thus constituted a business transfer, and thus, consequently, Apcom Select was entitled to deduct the VAT relating to modernization carried out, without being required to regularize VAT in favor of the State at the time of the conclusion of the lease contract.

The National Court decided to ask the following questions to the ECJ:

(1) Does the conclusion of a contract under which a corporation leases an immovable in which it operated a restaurant, with all capital and consumer goods, and the lessee continuing to operate that restaurant under the same sign as that used previously, constitute a business transfer within the meaning of Article 19 and Article 29 of the VAT Directive?

(2) If the first question is answered in the negative, is the operation described a service which can be qualified as a “leasing of immovable property” within the meaning of Article 135(1)(l) of the VAT Directive, or a complex service that can not be qualified as “rental of real estate”, taxed under the law?


No Opinion was given in this case. The European Court of Justice rules as follows:

(1) The concept of ‘the transfer of a totality of assets, or of a part thereof’, must be interpreted as meaning that it does not cover the transaction by which real property used for commercial exploitation is leased, together with all the capital goods and consumables necessary for that exploitation, even if the lessee continues to lessor’s activity under the same name.

(2) A lease for immovable property used for commercial purposes and for all immovable property equipment and consumables required for this operation constitutes a single service in which the rental of the immovable property is the main service.

Source: Curia