VAT deduction for renovation/reconstruction in connection with the rental of real property

• A partnership (Spørger) intends to engage in the rental of real property, specifically a building housing a museum.
• The Tax Council (Skatterådet) confirms that Spørger is considered a taxable entity when renting the property to the museum for consideration. Additionally, the Tax Council confirms that when Spørger incurs renovation costs for the buildings, there is a direct and immediate connection between the costs and outgoing VAT-taxable transactions.
• Therefore, Spørger is entitled to deduct the VAT on the expenses according to section 37, paragraph 1, of the VAT Act.
• However, the Tax Council declines to answer whether determining rent based on an average of 2-3 independent real estate agents’ assessments of market rent would constitute “commercial leasing,” as it involves a discretionary matter.
• The legal basis for this decision is Skatteforvaltningsloven § 21, stk. 4, nr. 1, and references are made to relevant sections of the VAT Act and the Legal Guidance for 2023.

Source: info.skat.dk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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