ECJ C‑707/18 (Amarasti Land Investment) – Judgment – Intermediary in the provision of services or investment expenditure made for the needs of a business

On 19 December 2019, the European Court of Justice gave its judgment in case C-707/18 (Amarasti Land Investiment SRL). The case deals with the VAT treatment and VAT destructibility of costs relating to intermediary services (undisclosed agent).

Article in the EU VAT Directive

Articles 24, 28, 167 and 168 of Council Directive 2006/112/EC

Article 24 (Taxable transaction – Supply of services)
1. ‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.
2. ‘Telecommunications services’ shall mean services relating to the transmission, emission or reception of signals, words, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception, with the inclusion of the provision of access to global information networks.

Article 28
Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.

Article 167 (Origin and scope of right of deduction)
A right of deduction shall arise at the time the deductible tax becomes chargeable.

Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.

Facts – Summary

Amărăşti Land Investment was established in 2014 for agricultural activities and purchased land through a two-stage process involving a bilateral promise to sell and completion of administrative formalities.
Romanian law requires contracts for the sale of immovable property to take the form of authentic instruments, which was not possible for the land in question.
Amărăşti Land Investment availed itself of third-party services to complete the required administrative formalities, and the promises to sell included a clause allowing the company to carry out all necessary work at its own expense.
The costs linked to the first registration of the land were not invoiced to the vendor, and the full price of the land was paid at the time of sale.
Amărăşti Land Investment submitted a request for VAT reimbursement, which was accepted, but subsequently received an additional VAT assessment on the grounds that it had supplied a service to the vendors in return for the land.
Amărăşti Land Investment challenged the assessment but its appeal was dismissed. The company argues that the costs incurred were investment-related and necessary for carrying out taxable transactions.

Facts – Detailed

Amărăşti Land Investment was established in 2014 for the purposes of carrying out agricultural activities, and purchased land to that end.
That land was purchased by means of a two-stage process. First, a bilateral promise to sell was concluded between the person promising to sell land (‘the promissory vendor’) and Amărăşti Land Investment, whereby the latter acquired a claim to ownership to that land. Secondly, upon completion of the administrative formalities provided for by law for concluding the contact, that contract was signed by the parties concerned.
In that regard, the referring court states that Romanian law requires contracts for the sale of immovable property, such as the land at issue in the main proceedings, to take the form of authentic instruments and that, in order for those contracts to be validly concluded by authentic instrument, the land concerned must be registered in the Land Register and the vendor recorded there as the proprietor of the land, which was not the case of the land at issue in the main proceedings.
In the context of its investments in land, and in order to complete the required administrative formalities before concluding the contract for the sale of that land, Amărăşti Land Investment availed itself, at its own expense, of the services provided by third parties, such as lawyers, notaries and companies providing specialist land-registration and topographic services. In particular, it availed itself of the services of a land-registration company for the purposes of the first registration of the land in the Land Register.
The promises to sell the land concerned included a clause whereby the promissory vendor agreed that Amărăşti Land Investment may carry out at its own expense all the work of gathering documentation, preparing files and authenticating and registering documents, and all the work relating to the Land Register and to the registration of the land in that register. In addition, the promissory vendor stated that it understood that all the registration procedures carried out by Amărăști Land Investment were absolutely necessary in order for the contract of sale to be able to be concluded by authentic instrument.
The costs linked to the first registration of that land in the Land Register, which the parties to the contract valued by common accord at EUR 750 per hectare, were not re-invoiced to the vendor. The promises to sell stated, in addition, that Amărăşti Land Investment was to pay the vendor, at the time they were concluded, the full price of the land, which did not include the value of the land-registration operations.
Those promises to sell included moreover a clause whereby the vendor was required to pay Amărăşti Land Investment the costs incurred to register the land concerned in the Land Register and damages in the amount of EUR 2 000 per hectare if it failed to fulfil its obligation to conclude the contract of sale within the prescribed period, either through its own fault or for any other reason except for reasons attributable to Amărăşti Land Investment.
Following the purchase of the land, Amărăşti Land Investment asked for a VAT refund, which was accepted by the tax authorities.
However, those authorities subsequently issued an additional VAT assessment on the ground that the sum of EUR 750 per hectare represented the value of the service, supplied by Amărăşti Land Investment to the vendors, relating to the registration of the land concerned and the conclusion of the contracts of sale by authentic instrument in return for the supply of that land. Those authorities stated, in that regard, that in return for that land, Amărăşti Land Investment had, first, paid a price and, secondly, supplied a service to the vendors, the cost of which had necessarily to be borne by them.
Amărăşti Land Investment challenged the tax assessment notice concerning the additional VAT that it was required to pay, but its appeal was dismissed by the tax authorities on the ground that Amărăşti Land Investment had supplied the services at issue in its own name, but on behalf of the vendors, without, however, invoicing their value to the beneficiaries or collecting the relevant VAT.
Before the referring court, Amărăşti Land Investment submits that the costs incurred by it valued at EUR 750 per hectare are investment-related costs incurred for the purposes of carrying out taxable transactions, for which it is entitled to deduct VAT.
It further submits that the amount of the costs related to the registration of the land at issue in the main proceedings in the Land Register was fixed at EUR 750 per hectare, in order to make it easier to evaluate the damage which could have been caused to it if the vendors had not fulfilled their obligation to conclude the contracts of sale for the land by authentic instrument. Amărăşti Land Investment states that, in practice, that amount, which varied from one transaction to another, could be greater or less than EUR 750.

Questions

1. Is Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, and in particular Articles 24, 28, 167 and 168(a) thereof, to be interpreted as meaning that, in the context of a transaction for the sale of immovable property which is not included in the national register of immovable property (Land Register) and which is not registered at the time of the supply, the purchaser, who is a taxable person and who assumes a contractual obligation to carry out, at his own expense, the necessary steps for its first registration in the national register of immovable property, carries out a supply of services to the vendor, or instead a purchase of services relating to his investment in immovable property in respect of which he is entitled to deduct VAT?
2. Is Directive 2006/112, and in particular Articles 167 and 168(a) thereof, to be interpreted as meaning that the costs incurred by a purchaser, who is a
taxable person, in connection with the first registration in the register of immovable property of property in respect of which the purchaser has a claim for the future transfer of ownership and which has been supplied to him by a vendor whose ownership of the property is not recorded in the register of immovable property, can be classified as pre-investment operations in respect of which the taxable person is entitled to deduct VAT?
3. Is Directive 2006/112, and in particular Articles 24, 28, 167 and 168(a) thereof, to be interpreted as meaning that the costs incurred by the purchaser,
who is a taxable person, in connection with the first registration in the register of immovable property of property which has been supplied to him and in respect of which the purchaser has a contractual claim for the future transfer of ownership from a vendor whose ownership of the property is not recorded in the register of immovable property, are to be classified as the provision of services to the vendor in a context in which the purchaser and the vendor have agreed that the price of the immovable property does not include the value of the land-registration operations?
4. For the purposes of Directive 2006/112, must the costs of administrative operations relating to immovable property which has been supplied and in
respect of which the purchaser has a claim for the future transfer of ownership from the vendor, including, but not limited to the costs of first registration in the register of immovable property, necessarily be borne by the vendor, or may such costs be borne, pursuant to an agreement between the parties, by the purchaser or by any other of the parties to the transaction, with the result that that person is entitled to deduct the VAT?

Questions – Summary

The case asks several questions related to the interpretation of the VAT Directive in the context of the sale of immovable property that is not registered in the national register of immovable property. The questions relate to whether the purchaser, who is a taxable person, carries out a supply of services or purchases services relating to their investment in immovable property, and whether the costs incurred by the purchaser in connection with the first registration in the Land Register can be classified as pre-investment operations. The case also asks whether such costs are to be classified as the provision of services to the vendor and whether the costs of administrative operations must necessarily be borne by the vendor or may be borne by the purchaser or any other party to the transaction.

AG Opinion

None

Decision

1. Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding the parties to a transaction, the aim of which is to transfer the ownership of immovable property, from agreeing a clause according to which the future purchaser will incur some or all of the costs of the administrative formalities relating to that transaction, in particular those connected with the first registration of that property in the national land register. However, the mere presence of such a clause in a bilateral promise for the sale of immovable property is not determinative in order to ascertain whether the future purchaser is entitled to deduct the value added tax relating to the payment of the costs arising from the first registration of the property concerned in the national land register.

2. Directive 2006/112, and in particular Article 28 thereof, must be interpreted as meaning that, in the context of a bilateral promise for the sale of immovable property not registered in the national land register, the future purchaser — a taxable person — who, as he or she contractually undertook to do with regard to the future vendor in that promise, carries out the necessary steps for the first registration of the property concerned in that register by having recourse to the services provided by third parties who are taxable persons, is deemed to have supplied the services in question himself or herself to the future vendor, within the meaning of Article 28, even though the parties to the contract agreed that the sale price of that property does not include the value of the land-registration operations.

Summary

The EU Council Directive 2006/112/EC on value added tax does not prevent parties in a property transaction from agreeing that the future purchaser will pay for administrative formalities related to the first registration of the property in the national land register. However, the presence of such a clause does not automatically entitle the purchaser to deduct the VAT related to those costs. In the context of a promise for the sale of unregistered property, if the future purchaser (who is a taxable person) arranges for third-party services to register the property and the sale price does not include land-registration costs, they are deemed to have supplied the services themselves to the future vendor.

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