The interested party is a partnership. It qualifes as a VAT entrepreneur. Its partners are married under prenuptial agreements. In 2009 and 2010, the partners had a house built on their land. The interested party has deducted the input tax incurred on the construction. The house was taken into use in 2010. The house is largely used by the partners (privately) and partly by the interested party (workspaces). The interested party does not pay any compensation to the partners for business use. For income tax purposes, the house regarded as a private asset.
The interested party appealed against the payment of VAT due to private use of the house in the final VAT returns of 2015, 2016 and 2017. The Tax Authorities rejected the appeals.
The lower court has ruled that the a preceeding judgment, to which the interested party now appeals, relates to a different situation. In that case there was a partnership with three partners (father, mother, daughter), who used a property that was only owned by two of them. In the present case, the partners are exactly the same persons as the house owners. According to the lower court, the interested party has correctly paid VAT on the private use.
Now, the Court rules as follows. As in the earlier judgment, the house was built by order of the two partners of the interested party. The house is owned by these two partners and is occupied by them. The partners allow the interested party to use part of the home for business purposes. In that case, it cannot be concluded that the home is a business asset belonging to the interested party. It is not the interested party who has the actual control over the house, but the two partners. According to the Court, the first question to be answered is whether the investment good belongs to the entrepreneur, in the sense that the entrepreneur can dispose of it as (actual) owner (ECJ Auto Lease Holland). The interested party at hand cannot. In retrospect, according to the Court, the interested party incorrectly applied for and received (full) deduction of input tax for the construction of the house.
At the time, the interested party incorrectly regarded the house as a business asset for VAT purposes and deducted the input tax incurred on the construction. Since the house is a business asset, the interested party does not owe VAT due to the private use by both partners.
Source: rechtspraak.nl
Author: Joyce Westerveld, VAT Advisor at RED
