VAT on termination payment for VAT-taxed rental is also subject to VAT

• The court ruled that VAT is payable on the termination fee for VAT taxable rental.
• The landlord and tenant had opted for VAT taxable rental.
• The landlord wanted to sell the building and terminate the lease agreement.
• They entered into a settlement agreement, where the landlord paid the tenant a termination fee of €250,000.
• Both parties believed that no VAT was payable, but the tenant could charge VAT if it turned out to be payable.
• The court determined that VAT is indeed payable on the termination fee.
• This is in line with previous court rulings and European case law.
• The imposition of a penalty for non-compliance was justified.
• The VAT assessment was correctly calculated based on the full amount of €250,000.

Source: taxlive.nl

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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