Roadtrip through ECJ Cases – Focus on ”Transfer of Going Concern” (Art.19 EU VAT Directive)

Last update: June 11, 2025

Article in EU VAT Directive 2006/112/EC

Article 19 (Taxable transaction – Transfer of Going Concern)
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.

(Article 5(8) of the Sixth VAT Directive)

Conditions for a Transfer of Going Concern to exist based on ECJ Cases

Transfer of a Business or Part of a Business: The transaction must involve the transfer of an entire business or a part of it that is capable of independent economic activity. This includes both tangible and intangible assets necessary for the ongoing operation of the business.
Continuity of Business Operations: The purchaser must intend to carry on the same kind of business as the seller. This means that the business operations should continue without significant interruption, and the purchaser should effectively take over the business’s activities.
Transfer of Assets: All the essential assets must be transferred. This may include immovable property (e.g., buildings), movable assets (e.g., equipment, inventory), and other essential resources (e.g., licenses, contracts) that are necessary for running the business.
No Change in Nature of Business: The nature of the business must remain the same post-transfer. The buyer should continue the same business activities that were conducted by the seller.
Transfer Must Be for Consideration: The transfer should generally occur for a consideration (payment), although this is not always a strict requirement. The key aspect is that the transaction should not be merely a liquidation or sale of assets without the intention of continuing the business.
Tax Registration: In many jurisdictions, both the seller and buyer should be registered for VAT (or the relevant tax), and the buyer must provide evidence of their intention to continue the business.
Proper Documentation: Appropriate agreements and documentation must be in place to formalize the transfer. This includes a written contract specifying the assets being transferred and the intention to operate the business as a going concern.

ECJ Cases Decided

C-408/98 (Abbey National plc) – Costs of the transferor for the services related to TOGC form are directly and immediately related to the entire economic activity
C-497/01 (Zita Modes) – TOGC covers intention to operate the business or the part of the undertaking transferred and not simply to immediately liquidate the activity concerned and sell the stock
C-137/02 (Faxworld) – Right to deduct VAT for preparing taxable activities of another person
C-29/08 (SKF) – VAT deduction related to disposal of shares if there is a direct and immediate link with the overall economic activities
- 40. In any event, even if Article 5(8) of the Sixth Directive or the first paragraph of Article 19 of Directive 2006/112 could be applied to a transaction such as that at issue in the main proceedings, a matter which it is for the national court to determine, it must be observed that both SKF and the Swedish Government stated at the hearing that the Kingdom of Sweden has chosen to exercise the option, provided for by those provisions, of treating the transfer of a totality of assets as not coming within the scope of the Sixth Directive. That being the case, a disposal of shares which amounts to a transfer of a totality of assets does not constitute an economic activity subject to VAT.
- 41. It follows from the foregoing that the answer to the first question is that Articles 2(1) and 4(1) and (2) of the Sixth Directive and Articles 2(1) and 9(1) of Directive 2006/112 must be interpreted as meaning that, where a parent company disposes of all the shares in a wholly-owned subsidiary and of its remaining shareholding in a controlled company which was previously wholly owned by it, and where it has supplied to those companies services that are subject to VAT, that disposal is an economic activity coming within the scope of those directives. However, in so far as the disposal of shares is equivalent to the transfer of a totality of assets or part thereof of an undertaking, within the meaning of Article 5(8) of the Sixth Directive or the first paragraph of Article 19 of Directive 2006/112, and where the Member State concerned has chosen to exercise the option provided for by those provisions, that transaction does not constitute an economic activity subject to VAT.
C-444/10 (Schriever) – TOGC includes rental for indefinite period of the retail space to the transferee
C-651/11 (X BV) – The transfer of 30% of the shares in a BV for which the transferor provides VAT-taxed services does not constitute a Transfer of Going Concern
- 31. In the absence of an express reference in the Sixth Directive to the law of the Member States for the purpose of determining the meaning and scope of the concept of a transfer of a totality of assets or part thereof, this constitutes an independent concept of European Union law and must, therefore, be given a uniform interpretation in order to prevent divergences in the application of the VAT system in the Member States (Zita Modes, paragraphs 32 and 35, and Schriever, paragraph 22).
- 38. Therefore, as the German Government submits, the transfer of shares in a company cannot, irrespective of the size of the shareholding, be regarded as equivalent to the transfer of a totality of assets or part thereof within the meaning of Article 5(8) of the Sixth Directive, unless the holding is part of an independent unit which allows an independent economic activity to be carried out, and that activity is carried on by the transferee. The mere disposal of shares, unaccompanied by the transfer of assets, does not allow the transferee to carry on an independent economic activity as the transferor’s successor.
C-17/18 (Mailat – Apcom Select) – TOGC, a lease of immovable property and related equipment and consumables constitute a single rental service
C-729/21 (Dyrektor Izby Administracji Skarbowej w Łodzi)- Order – Sale of real estate can be considered as a Transfer of Going Concern
C-250/22 (Fallimento Villa di Campo Srl) – Order – TOGC artificially broken down into a number of different supplies