Plaintiff is a municipality, who – until 1 January 2014 – had the task to provide fire services. Plaintiff had a fire station built, which it took into use as such in 2012. Plaintiff has been reimbursed all VAT charged to it by the contractors for the construction of the fire station. This is based on the Dutch “VAT compensation fund” for governmental bodies.
As of January 1, 2014, Plaintiff has transferred her fire service tasks to another public body, the “Groningen Safety Region” (VRG) and as of that moment the fire station was used by the VRG. On December 13, 2016, Plaintiff transferred the title to the fire station to the VRG. As from that moment, the fire station was used by an “individual third party” so that the right of compensation no longer existed. Part of the compensated VAT would have to be revised and paid back.
The dispute focuses on the question whether, for the purpose of calculating the revision of the compensated VAT, only the VAT charged by the contractor in connection with the building shell of the fire station should be taken into account, or whether this must be based on the VAT charged on the total costs for the construction of the fire station. In other words: must the VAT incurred on services rendered by third parties to make the building function as a fire station (architect costs, installation costs, costs of public utilities) be included in the revision base as well?
According to the lower court, all (compensated) VAT incurred on the total costs for the construction of the fire station until its first use is now subject of the VAT revision. After all, these costs were used to make the fire station ready for its use as such. The fact that in the Netherlands, input VAT incurred on services normally are not eligible for revision, does not alter this. The services have more or less been absorbed by the total building costs.
The lower court bases its judgement on a judgement of the Dutch Supreme Court of 2019.
Source: www.rechtspraak.nl
Author: Joyce Westerveld, VAT Advisor at RED
