Unofficial translation/summary:
- The applicant (Municipality of Wrocław) has submitted a request to the tax authorities for an individual ruling.
- The question was whether VAT should be levied on fees that are paid by law for the conversion of the right of perpetual usufruct into a right of ownership.
- The municipality is an active registered VAT owner of real estate on which a right of perpetual usufruct is established.
- The holder of the right of perpetual usufruct pays an annual fee. As of 01.01.2019 the municipality will lose ownership of these properties. Holders of the right of perpetual usufruct will become the owner of the plots.
- As a result of this conversion, the new owners will have to pay a conversion fee to the municipality. This fee will have to be paid every year over a period of 20 years from the conversion.
- The tax authorities have established that since 01.05.2004 (Poland’s accession to the EU) the establishment of a perpetual usufruct must be regarded as a supply of goods that are subject to VAT.
- With regard to the transactions for which the municipality will receive reimbursements, it will therefore act as a person liable for VAT.
- The municipality has appealed against the individual ruling. According to the municipality, the conversion of the right of perpetual usufruct into a property right has no consequences for the “actual power” that the usufructuary has already acquired at the time of the transfer of the right of perpetual usufruct, and therefore cannot be treated as a new delivery of the same good.
- The municipality states that the conversion of the right of perpetual usufruct into a right of ownership on the same parcel is not subject to VAT.
The doubts raised in the present case concern, in the first instance, the classification of the conversion under the law of a right of perpetual usufruct to plots of land into a property right. The referring court asks whether that conversion constitutes a supply of goods subject to VAT within the meaning of the VAT Directive. If the Court concludes that there is no question of a supply of goods within the meaning of Article 14 (2) (a) in conjunction with Article 2 (1) (a) of the VAT Directive, it is necessary to consider the arguments put forward by the parties and the doubts expressed therein. Should the Court make a difference between acts of the municipality as a public body and as the owner, the question must also be answered whether acts involving the usual exercise of the right of ownership by the holder of that right cannot, by themselves, be regarded as the exercise of an economic activity.
Preliminary questions:
- Is the conversion by law of a right of perpetual usufruct on immovable property to a right of ownership constitutes, under circumstances such as the present case, a supply of goods within the meaning of Article 14 (2) (a) in conjunction with Article 2 (1) (a) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax (hereinafter: Directive 2006/112), which is subject to VAT?
- If the first question is answered in the negative, the conversion by law of a right of perpetual usufruct to immovable property into a property right then constitutes a supply of goods within the meaning of Article 14 (1) in conjunction with Article 2 (1) , point (a) of Directive 2006/112, which is subject to VAT?
- Does a municipality that receives compensation for the conversion by law of a right of perpetual usufruct on a property into a property right, under circumstances as in the present case, act as a taxable person within the meaning of Article 9 (1) in conjunction with Article 2 (1) (a) of Directive 2006/112 or as a public body within the meaning of Article 13 of Directive 2006/112?
Source: minbuza.nl (Dutch)
