On January 17, 2013, the ECJ issued its decision in the case C-543/11 (Woningstichting Maasdriel).
Article in the EU VAT Directive
Article 135(1)(j)(k) of Directive 2006/112/EC
Article 135 (Exemption)
1. Member States shall exempt the following transactions:
(k) the supply of land which has not been built on other than the supply of building land as referred to in point (b) of Article 12(1);
Facts
- On 13 November 2006, the Woningstichting entered into an agreement for the sale of a plot of land with the municipality of Maasdriel (the ‘vendor’). At that time there was a building on the land which had been used as a library (‘the building’). Next to the building there was a public, surfaced car park.
- The contract of sale stipulated that ‘the property sold shall be supplied in an improved condition’ in view of the Woningstichting’s intention to have homes built on the land, possibly combined with offices with parking facilities. It was agreed that the vendor would be responsible for the demolition of the building as well as for the removal of the surface of the car park. The agreed price for the plot was EUR 1 380 000 (excluding VAT), together with the cost of the demolition, estimated at EUR 22 000 (excluding VAT).
- In the months of January and February 2007 the vendor had the building demolished and the resulting building rubble removed.
- The land was supplied to the Woningstichting at the time of the transfer of ownership by notarial act of 2 March 2007. On that date, the car park was still in use, as the surface had yet to be removed and the Woningstichting had not yet obtained the necessary planning permission for its construction plans for the land, which was still at the planning and design stage.
- Under Netherlands law, in order to avoid double taxation, if a purchase of real estate is subject to VAT, it is exempted from the transfer duty calculated on the sale price. The supply of building land is subject to VAT. By contrast, the supply of land which ‘has not been built on’ is exempt from VAT and remains subject to transfer duty.
- The Woningstichting paid VAT to the vendor for the supply of the land at issue, as it considered that it was building land and was, accordingly, subject to VAT, meaning that transfer duties were not due.
- The tax inspector, however, considered that the supply at issue concerned land which had not been built on, exempting it as such from VAT and thus subjecting it to the payment of transfer duty. The Woningstichting received an assessment of the outstanding transfer duty. When the objection lodged against that assessment was rejected by decision of the tax inspector, the Woningstichting brought an action against that decision before the Rechtbank te Arnhem (District Court, Arnhem). That court dismissed the action.
Questions
Must Article 135(1)(k) of the VAT Directive 2006, in conjunction with Article 12(1) and (3) of that directive, be interpreted as precluding in all cases the exemption from VAT of the supply of land which has not been built on which has come into existence by the demolition of existing buildings thereon, demolition which was carried out with a view to the construction of new buildings?
AG Opinion
None
Decision
Article 135(1)(k) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Article 12(1) and (3) therein, must be interpreted as meaning that the exemption from value added tax provided for in Article 135(1)(k) does not cover the supply, such as that at issue in the main proceedings, of land which has not been built on following the demolition of the building situated on it, even where, at the time of that supply, improvement works on the land, apart from that demolition, had not been carried out, where it is apparent from an overall assessment of the factual circumstances surrounding that transaction and prevailing at the time of supply, including the intention of the parties when it is supported by objective evidence, that, at that time, the land at issue was in fact intended to be built on, a matter which is for the referring court to determine.
Summary
Demolition work with a view to future construction – Concepts of “undeveloped land” and “construction site”
The delivery of an undeveloped site, after the demolition of the building on that site, does not fall under the VAT exemption, even if no provisions have been made for this site on the date of that delivery, other than the above-mentioned demolition, where a global assessment of the circumstances accompanying the act at issue in the main proceedings and which prevailed on the date of delivery — including the intention of the parties, provided that it is supported by objective evidence — shows that on that date the site in question was actually intended to be built on, which is to be determined by the referring court.
Source
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