On 19 December 2018, the European Court of Justice was asked preliminary questions in case C-707/18 (RO vs Amărăşti Land Investment).
Amarasti Land Investment, established in Romania, is a company set up in 2014 with the aim of setting up and operating a farm on an area of approximately 4,000 hectares.
Amarasti buys agricultural land following a two-stage procedure. In the first phase, a provisional deed of sale is concluded between the future sellers and the prospective buyer, on the basis of which the prospective buyer is entitled to claim ownership of the terrain. After the administrative formalities required by law have been concluded, in the second phase the actual sales agreement is concluded on the basis of which the legal ownership of the land is obtained.
In order to ensure the best possible investment, Amarasti relied on specialized companies, such as intermediary firms, lawyers’ and notary’s offices, land registry offices and topographical agencies, to verify the legal status of the land offered for sale and to carry out all the transactions prior to the sale.
Amarasti justified the need for such services by the fact that the sites in the geographical area where it carries out its operations are fragmented, have small surfaces and are not registered in the land register. For a lawful realization of real estate sales agreements, the law requires that the sites are registered in the land register and that the person acting as the seller during the transaction is registered as the owner of the land in the land register, so that, in the case of Amarasti, it is impossible to buy the land directly and it is necessary for the purchaser to follow the two-stage procedure described above.
The costs for registration of the land in question in the Land Registry are not charged to the future sellers and will not actually be borne by them. Thus, a provision is included in the Provisional Sale Act of the land where the Seller declares to agree that the prospective purchaser (Amarasti) will carry out all activities at its own expense for gathering information, creating files, legalizing and registering documents, all activities at the Land Registry and registration of the land in the Land Registry, insofar as necessary in order for the site in question to notarial deed of sale can be drawn up.
Parties agreed in advance that these activities are estimated at €750 per hectare. They also included a penalty clause (compensation of €2,000 per hectare). The parties also agreed that the applicant will pay the full purchase price at the time the provisional deed of sale is concluded and that this price does not include the consideration for registration in the land register, which can be distinguished from it.
Amarasti asked for a refund of the VAT paid on the invoices issued by the intermediaries. The Romanian tax authorities denied this refund, arguing that there was no separate supply of services, but that the fees paid were actually a discount on the purchase price paid by Amarasti.
The Romanian Court therefore asks the following preliminary questions:
1. Must Directive 2006/112, in particular Articles 24, 28, 167 and 168 (a), be interpreted as meaning that where, in the case of a sale of immovable property not registered in the Land Registry, and which are not known at the time of delivery, the taxable buyer undertakes under the contract to pay, at his expense, the necessary to take steps to first register these goods in the Land Registry, to provide a service for the seller or to purchase services related to his investment in immovable property for which he should be entitled to deduct VAT?
2. Can Directive 2006/112, in particular Article 167 and Article 168 (a), be interpreted as meaning that the costs incurred by the taxable purchaser for first registration in the land register of immovable property for which he is entitled to the future transfer of the right of ownership and which have been supplied to him by the seller whose property right on these goods is not registered in the land register, can be regarded as transactions preceding the investment for which the taxpayer is entitled to VAT deduction?
3. Must the provisions of Directive 2006/112, in particular Articles 24, 28, 167 and 168 (a), be interpreted as meaning that the costs incurred by the taxable purchaser for first registration in the land register of immovable property have been delivered to him and for which he, by virtue of an agreement, claims the future transfer of the property right by the seller whose property right on these goods is not registered in the land register, shall be regarded as a service provided for the seller in circumstances in which the buyer and the seller have agreed that the counter-value for registration in the land register is not included in the price of the immovable property?
4. For the purposes of Directive 2006/112, serve the costs of the administrative transactions relating to immovable property delivered to that purchaser and for which, under an agreement, he claims the future transfer of the right of ownership by the seller – including but not limited to the costs of first registration in the land register – must necessarily be borne by the seller? Or can these costs also be borne by the buyer or by one of the parties to the transaction, in accordance with what has been agreed between the parties, with the result that the right to deduct VAT accrues to that person?
Source: minbuza.nl (Dutch)