Flashback on ECJ Cases – C-259/11 (DTZ Zadelhoff) – Mediation in the transfer of shares in companies – Act that also involves transfer of ownership of immovable property of these companies

On July 5, 2012, the ECJ issued its decision in the case C-259/11 (DTZ Zadelhoff).

Context: Sixth VAT Directive — Articles 5(3)(c) and 13B(d)(5) — Negotiation of a transaction involving the transfer of company shares — Transaction which also entails the transfer of the ownership of immovable property held by such companies — Exemption

Article in the EU VAT Directive

Article 5(3)(c) and 13B(d)(5) in the EU VAT Directive (Articles 15(2)(c) and 135(1)(f) of the EU VAT Directive 2006/112/EC.

Article 15
2. Member States may regard the following as tangible property:
(c) shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof.

Article 135
1. Member States shall exempt the following transactions:
(f) transactions, including negotiation but not management or safekeeping, in shares, interests in companies or associations, debentures and other securities, but excluding documents establishing title to goods, and the rights or securities referred to in Article 15(2);

Facts

At the material time in the main proceedings, Fabege AB (‘Fabege’), a company established in Sweden, held, indirectly, all the shares in World Fashion Centre Amsterdam BV, the company which owned and operated Towers I and II of the World Fashion Centre Complex (‘the WFC’) in Amsterdam (the Netherlands). Fabege also held, indirectly, all the shares in Fabege WF BV, the company which owned and operated Tower IV, forming part of the WFC.
Stienstra BV Bedrijfshuisvesting (‘Stienstra’), a company established in ’s-Hertogenbosch (the Netherlands), held, indirectly, all the shares in De Herven III BV (‘De Herven’), which owned and operated the Soetelieve office complex, situated in that town.
DTZ Zadelhoff is a real estate brokerage and consultancy business.
In 1999, DTZ Zadelhoff was instructed by Fabege, for a fee, to find prospective purchasers for the WFC. Fabege intended to transfer that complex by transferring the shares in the companies which indirectly owned it. The asking price of the shares was based almost entirely on the market value of the WFC as real estate. In accordance with its instructions, DZT Zadelhoff found a purchaser to whom the shares were sold and transferred between 5 October 1999 and 24 January 2000.
In 2000, DTZ Zadelhoff was instructed by Stienstra, for a fee, to find prospective purchasers for the Soetelieve office complex. The question remained open as to whether the legal ownership of the complex or the ownership of the shares in De Herven was to be transferred. Ultimately, DTZ Zadelhoff’s efforts resulted in a buyer being found, to whom the shares in De Herven were sold and transferred.
DTZ Zadelhoff neither charged nor paid VAT in respect of the services provided to Fabege and Stienstra consisting in finding buyers for the properties in question. It considered that the provision of those services was either exempt from tax, under Article 11(1)(i)2° of the Law on Turnover Tax of 28 June 1968, or was not taxable in the Netherlands, since the services in question are deemed not to have been performed in the territory of the Kingdom of the Netherlands if the instructing party is not established in that Member State.
The Inspector van de Belastingdienst (‘the Inspector’) considered that the exemption was not applicable and that the provision of services was to be deemed to have taken place in the Netherlands and, consequently, a notice of additional assessment for VAT was issued to DTZ Zadelhoff for the period from 1 January to 31 December 2000. After that company lodged an objection, the amount of the assessment was reduced by decision of the Inspector.
DTZ Zadelhoff lodged an appeal against the Inspector’s decision with the Rechtbank te Haarlem (District Court, Haarlem), which dismissed the appeal as unfounded. The company lodged an appeal against that decision with the Gerechtshof te Amsterdam (Court of Appeal, Amsterdam), which upheld the decision at first instance. DTZ Zadelhoff then lodged an appeal in cassation with the Hoge Raad der Nederlanden (Supreme Court of the Netherlands).
The Hoge Raad der Nederlanden considers that the Gerechtshof te Amsterdam correctly determined the place in which the services must be deemed to have been performed. On the other hand, the referring court entertains doubts as to the correct classification, for the purposes of exemption from VAT, of a transfer of company shares which also entails the transfer of the ownership of immovable property held by such companies.

Questions

(1) Must Article 13B(d)(5) of the Sixth Directive be interpreted as also covering transactions, such as those carried out by the interested party, which in essence relate to the immovable property held by the companies concerned and its (indirect) transfer, solely on the ground that those transactions were aimed at, and resulted in, the transfer of the shares in the companies?

(2) Is the exception to the exemption contained in the second indent of Article 13B(d)(5) of the Sixth Directive also applicable if the Member State has not availed itself of the possibility provided by Article 5(3)(c) of the Sixth Directive of considering shares or interests equivalent to shares giving the holder thereof rights of ownership or possession over immovable property to be tangible property?

(3) If the previous question must be answered in the affirmative, must the aforementioned shares or interests equivalent to shares be understood to include shares in companies which, directly or indirectly (by means of (sub-) subsidiaries), own immovable property, regardless of whether they exploit it as such or whether they utilise it in the context of a different type of undertaking?

AG Opinion

None

Decision

Article 13B(d)(5) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that the exemption from value added tax in that provision covers transactions, such as those at issue in the main proceedings, which are designed to transfer shares in the companies concerned and have that effect but which, in the final analysis, concern immovable property held by those companies and the (indirect) transfer of that property. The exception to the exemption provided for in the second indent of that provision is not applicable if the Member State has not availed itself of the possibility provided by Article 5(3)(c) of the Sixth Directive of considering shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property to be tangible property.

Summary

Mediation in the transfer of shares in companies – Act that also involves transfer of ownership of immovable property of these companies

Acts aimed at and resulting in the transfer of shares, but which essentially concern the immovable property held by these companies and the (indirect) transfer thereof.

The exception to the VAT exemption does not apply if the Member State has not made use of the option provided for in the Directive to sell the units and shares the possession of which entitles the holder de jure or de facto to the ownership or enjoyment of immovable property as to point out physical things.

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