On 28 February 2019, the European Court of Justice rules in case C-27/18 (Manuel Jorge Sequeira Mesquita), which deals with the question if the VAT exemption for immovable property can apply to the transfer of an exploitation right.
Decision
Article 13B(b) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that the exemption from value added tax on the leasing or letting of immovable property provided for in that provision is applicable to a contract for transfer of the use of land comprising vineyards for agricultural purposes to a company engaged in viticulture, entered into for a period of one year, automatically renewable and under which rent is paid at the end of each year.
We wrote about this case earlier.
Simplified facts:
- The applicant entered into an agreement with a contractor, under which the applicant transferred the agricultural exploitation of a couple of vineyards. The contractor is a grape grower and used the land to produce grapes.
- A tax audit was carried out with the applicant, after which an assessment was raised as the Portuguese tax authorities regarded the transfer of the exploitation rights as taxable services.
- The applicant claims that he is exempt from VAT, arguing that the exploitation rights related to immovable property.
Preliminary questions:
Must article 135 (1) (l) of Council Directive 2006/112 / EC of 28 November 2006 on the exemption for the letting of immovable property be interpreted as meaning that that exemption applies to a agreement to transfer the agricultural exploitation of rural immovable property from vineyards to a company that has agricultural purposes as a social purpose, whereby this agreement is concluded for a period of one year and can be automatically extended for periods of the same duration and on the basis thereof end of each year the relevant rent must be paid?
Judgment:
The ECJ rules that the exemption from VAT on the leasing or letting of immovable property is applicable to a contract for transfer of the use of land comprising vineyards for agricultural purposes to a company engaged in viticulture, entered into for a period of one year, automatically renewable and under which rent is paid at the end of each year.
Source: Curia
