In the evolving landscape of Value Added Tax (VAT) regulation, the interpretation of asset transfers has become increasingly complex, particularly in the context of partnerships and ownership structures. The recent case of T-366/25, commonly referred to as the Szytelbiecka case, brings to the forefront critical questions about how VAT law applies to the transfer of ownership shares in a business. Specifically, it examines whether transferring half shares of an undertaking to non-taxable individuals—who then intend to contribute these shares to a partnership—constitutes a transfer of a totality of assets under Article 19 of the EU VAT Directive.
As tax authorities and businesses alike navigate these intricate regulations, the implications of this ruling could significantly impact how transactions are structured and reported for VAT purposes. This article delves into the key aspects of the Szytelbiecka case, the legal principles at play, and the potential ramifications for businesses operating within the European Union. Understanding these developments is essential for ensuring compliance and optimizing tax strategies in an increasingly scrutinized environment.
Summary
- Background of the Case: The case involves D.B., who sought an advance tax ruling regarding the VAT implications of donating her business to her daughters. The tax authority ruled that the donation did not qualify as a transfer of an entire undertaking, leading to a dispute over VAT liability.
- Key Questions to the Court: The Supreme Administrative Court referred questions to the CJEU regarding whether a transfer of assets to non-entrepreneurs, who would subsequently contribute those assets to a partnership, constitutes a transfer of a totality of assets under Article 19 of the VAT Directive.
- CJEU’s Interpretation and Ruling: The Advocate General concluded that the transfer of shares in an undertaking to individuals who do not intend to continue the business activity does not meet the criteria for VAT exemption under Article 19. The court emphasized that each transaction must be assessed individually, and the lack of independent business activity by the recipients disqualifies the transfer from being treated as a non-taxable supply.
Articles in the EU VAT Directive 2006/112/EC
Article 19 of the EU VAT Directive 2006/112/EC
Article 19
In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor.
Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article.
Questions
Must Article 19 of Council Directive 2006/112/EC on the common system of value added tax be interpreted as meaning that a transfer of a totality of assets within the meaning of that provision also occurs when there is a transfer without consideration by a taxable person of a half share each of a totality of assets to two individuals who are not taxable persons and who intend to contribute those shares immediately as a contribution in kind to a business partnership of which they are partners?
Source
Other ECJ cases referred to
- Zita Modes (C-497/01): This case clarified the conditions under which a transfer can be considered a supply of goods and the implications for VAT treatment.
- Abbey National (C-408/98): This judgment emphasized the necessity for continuity in business activity for a transaction to be treated as a non-taxable supply under VAT law.
- Schriever (C-444/10): This case discussed the interpretation of taxable supplies and the requirements for determining whether a transaction qualifies for VAT exemption.
- X BV (C-651/11): Addressed the individual assessment of transactions and the interpretation of “transfer” in VAT law.
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