Briefing Document: EU VAT and Land Sales by Spouses (C‑213/24 Grzera)

Review of the European Court of Justice (ECJ) judgment in Case C‑213/24 concerning the interpretation of EU VAT Directive (2006/112/EC) regarding the sale of land by individuals, particularly in the context of engaging a professional agent and statutory joint ownership between spouses.

Executive Summary:

This briefing document summarises the key findings of the ECJ in Case C‑213/24, which addresses two crucial aspects of applying VAT to land sales by individuals within the EU. The judgment clarifies that the sale of land, even if initially personal assets, can be considered an “economic activity” making the seller a “taxable person” under Article 9(1) of the VAT Directive, especially when “active steps to market property by mobilising resources similar to those deployed by producers, traders or persons supplying services” are undertaken. Importantly, this can apply even if these steps are carried out by a professional agent acting on behalf of the seller. Furthermore, the judgment provides guidance on determining the “taxable person” in the context of statutory joint ownership between spouses, stating that while national law is relevant for context, the determination is based on EU criteria of independence and economic risk. The Court concludes that statutory joint ownership can potentially be deemed the taxable person if the spouses act jointly in the sale and the joint ownership bears the economic risk. VATupdate.com is noted as a source for updates on VAT and customs news.

Main Themes and Key Ideas:

Defining “Economic Activity” and “Taxable Person” in Land Sales:

The VAT Directive has a “very wide scope to VAT,” defining “taxable person” broadly as “any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.” (Paragraph 18 of CURIA document; also mentioned in Briefing Document).
An “economic activity” includes “all activities of producers, traders or persons supplying services” and, in particular, “the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis”. (Paragraph 4 of CURIA document).
The sale of land can constitute an economic activity, particularly when the seller takes “active steps to market property by mobilising resources similar to those deployed by producers, traders or persons supplying services”. (Paragraph 19 of CURIA document; also mentioned in Briefing Document).
Examples of such “active steps” include:
Subdividing the property and undertaking necessary land register amendments.
Changing the land’s designation (e.g., from agricultural to building land).
Acquiring additional land for access.
Connecting to public utility networks.
Obtaining required authorisations.
Promoting the plots to potential buyers.
Preparing necessary sale documents. (Paragraph 20 of CURIA document; also mentioned in Briefing Document).
The initial purpose for acquiring the land (e.g., personal needs or not for economic activity) does not prevent its subsequent sale from being classified as an economic activity. (Paragraph 21 of CURIA document; also mentioned in Briefing Document).

The Role of a Professional Agent:

Even if “active steps to market the property” are primarily carried out by a professional trader acting as an agent for the landowner, the landowner can still be considered a “taxable person carrying out an economic activity independently.” (Paragraph 26 of CURIA document; also mentioned in Briefing Document).
The key is the nature of the steps taken – whether they are “similar to those deployed by producers, traders or persons supplying services”. (Paragraph 26 of CURIA document; also mentioned in Briefing Document).
While the agent’s remuneration method might shift some immediate economic risk to the agent, the “final economic risk, which would materialise in the absence of a sale… falls solely on the principals”. (Paragraph 25 of CURIA document; also mentioned in Briefing Document).

Identifying the “Taxable Person” in Statutory Joint Ownership:

The determination of who is a “taxable person” under the VAT Directive is based on EU law criteria, which are applied uniformly. (Paragraph 31 of CURIA document; also mentioned in Briefing Document).
The criterion of “independently” requires performing activities “in his or her own name, on his or her own behalf and under his or her own responsibility,” and bearing the “economic risk associated with the carrying-out of those activities.” (Paragraph 23 and 29 of CURIA document; also mentioned in Briefing Document).
National law, such as provisions on statutory joint ownership, can be “useful in determining whether… the criteria for considering that an economic activity has been carried out independently… are satisfied,” but it is not the sole determinant. (Paragraph 32 of CURIA document; also mentioned in Briefing Document).
The mere fact of joint ownership does not prevent individual spouses from being separately subject to tax if they independently carry out an economic activity. (Paragraph 34 of CURIA document; also mentioned in Briefing Document).
However, the judgment states that Article 9(1) “does not preclude the statutory joint ownership formed by co-owning spouses from being regarded as a taxable person… where those spouses appear, in the eyes of third parties, to have carried out together the sale of land falling within that joint ownership… and where the economic risk linked to the exercise of that activity is borne by the joint ownership.” (Paragraph 40 of CURIA document; also mentioned in Briefing Document).
Factors suggesting spouses acted jointly include the requirement for consent of both spouses for property transactions under Polish law and joint actions such as concluding the contract with the agent. (Paragraph 37 and 38 of CURIA document).

Important Ideas/Facts and Quotes:

Broad Scope of VAT: “the VAT Directive attributes a very wide scope to VAT, by giving the concept of ‘taxable person’ a broad definition focused on independence in the exercise of an ‘economic activity’” (Paragraph 18).
Indicators of Economic Activity: “A relevant assessment criterion is the fact that the party concerned has taken active steps to market property by mobilising resources similar to those deployed by producers, traders or persons supplying services” (Paragraph 19).
Agent’s Role and Taxable Person Status: A person can be a taxable person even when “entrusting the preparation of the sale to a professional trader who carries out, as that person’s agent, active steps to market the property by mobilising, for the purposes of that sale, resources similar to those deployed by producers, traders or persons supplying services” (Paragraph 26).
Economic Risk: “the final economic risk, which would materialise in the absence of a sale… falls solely on the principals, subject to that contract providing otherwise, which it will be for the referring court to ascertain” (Paragraph 25).
Uniform Interpretation of Taxable Person: “the status of taxable person must be interpreted in a uniform manner in all the Member States and assessed exclusively on the basis of the criteria set out in Article 9(1) of the VAT Directive” (Paragraph 31).
Relevance of National Law: “taking provisions of national law into account may be useful in determining whether… the criteria for considering that an economic activity has been carried out independently… are satisfied” (Paragraph 32).
Statutory Joint Ownership as Taxable Person: Article 9(1) “does not preclude the statutory joint ownership formed by co-owning spouses from being regarded as a taxable person carrying out an economic activity independently, where those spouses appear, in the eyes of third parties, to have carried out together the sale of land falling within that joint ownership, which constitutes an economic activity, and where the economic risk linked to the exercise of that activity is borne by the joint ownership” (Paragraph 40).

Context of the Case (Grzera):

The case involves a Polish couple, E. T. and W. T., who sold agricultural land held under statutory joint ownership after hiring a professional agent (B. A. Z.) to prepare the land for sale (subdivision, zoning changes, infrastructure connections, marketing). The Polish tax authority subjected each spouse separately to VAT liability. The referring court questioned whether the sale constituted an economic activity given the agent’s significant involvement and the allocation of economic risk, and whether each spouse individually or the statutory joint ownership should be considered the taxable person for VAT.

Outcome:

The ECJ’s judgment provides guidance to the referring court. It confirms that the engagement of an agent does not automatically preclude the landowners from being considered taxable persons if active marketing steps resembling those of a professional trader are taken. It also clarifies that while national law on joint ownership provides context, the determination of the taxable person (individual spouses or the joint ownership) depends on the EU criteria of independence and economic risk, with the possibility of the statutory joint ownership being the taxable person if spouses act jointly and the joint ownership bears the economic risk.

Briefing Document: EU VAT and Land Sales by Spouses (C‑213/24 Grzera)

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