Option for VAT-Taxed Rental Invalid Where Part of the Property is Sub-Let VAT-Exempt – No Input VAT Recovery for Tenant

• Rechtbank Noord-Holland ruled that X and its landlord wrongly opted for VAT-taxed rental under Article 11(1)(b)(5°) Wet OB 1968, because part of the rented property is sub-let with a VAT exemption – meaning the 90% taxable-use threshold (or 70% for designated sectors) under Article 6a Uitvoeringsbeschikking OB 1968 is not met. [drimble.nl], [belastingdienst.nl]
• As a direct consequence, X has no right to deduct the input VAT charged by the landlord on the rent, because the legal basis for VAT being due on those invoices is missing – the rent should have been VAT-exempt. [drimble.nl], [belastingdienst.nl]
• The decision illustrates a key compliance risk in multi-tier real estate structures: the tax status of downstream (sub-)lettings determines the validity of the upstream option, and any deduction taken without satisfying the 90%/70% test exposes the tenant to VAT corrections and potential adjustments under the 10-year revision period (herzieningstermijn). [btwadvies.com], [belastingdienst.nl]

Article

On 25 June 2026, the District Court of Noord-Holland delivered a notable ruling on the option to tax (optie voor belaste verhuur) for commercial real estate. The Court held that the option was not validly exercised between X (the tenant) and its landlord, because X sub-let part of the property to a third party under the VAT exemption of Article 11(1)(b) Wet OB. [drimble.nl]

Legal framework. Under Dutch VAT law, rental of immovable property is in principle VAT-exempt (Article 11(1)(b) Wet OB 1968). Landlord and tenant may, by joint election (Article 11(1)(b)(5°) Wet OB and Article 6a Uitvoeringsbeschikking OB), opt for VAT-taxed rental – but only if the tenant uses the property for at least 90% (70% for certain sectors) for activities giving rise to input VAT recovery. [belastingdienst.nl], [belastingdienst.nl]

Court’s reasoning. Because X sub-let a portion of the premises under the VAT exemption, that part of the building was used for exempt activities, breaching the 90%/70% threshold. Consequently:

• the option for VAT-taxed rental between X and the landlord was invalid from the outset;
• the VAT charged by the landlord on the rent invoices was not legally due;
• X therefore has no right to deduct that VAT as input tax (no Article 15 Wet OB recovery for VAT that was not properly due);
• the landlord may, depending on the facts, face revision (herziening) consequences over the 10-year period for the building (Article 13 Uitvoeringsbeschikking OB). [drimble.nl], [btwadvies.com]

Practical impact. The judgment is a strong reminder for tenants and landlords to continuously monitor the actual VAT-taxable use of leased premises – the option to tax is not a “set-and-forget” mechanism. As the Belastingdienst’s own guidance confirms, the option can only be exercised together with the tenant, the use criterion must be satisfied throughout the lease, and contractual provisions (typically ROZ models) must precisely describe the premises and the tenant’s accounting year. [belastingdienst.nl], [btwadvies.com]

The ruling also aligns with a broader case-law trend (e.g. Hof Den Haag’s earlier Koninklijk Conservatorium decision of December 2025) confirming that “verhuur-plus” or service-rich sub-lettings can still be classified as VAT-exempt rental where the predominant element is the use of the immovable property. [futd.nl]

Sources & official links

• 📰 Drimble / Taxlive –“Optie voor belaste verhuur niet mogelijk door BTW-vrijgestelde onderverhuur” (25 June 2026): Taxlive
• 🇳🇱 Belastingdienst – Kiezen voor belaste verhuur (official guidance): [belastingdienst.nl]
• 🇳🇱 Belastingdienst – Btw bij verhuur van een onroerende zaak (overview): [belastingdienst.nl]
• 📚 BelastingZaken Advies 2025/106 – De verhuur van een onroerende zaak en btw (90%/70% thresholds & 10-year revision): [btwadvies.com]
• 📚 Besluit onroerende zaken omzetbelasting, § 5.8.2.1 (formal-defect approval policy for invalid options): [inview.nl]
• ⚖️ Related case law – Verhuur aan onderhuurder niet belast met BTW; geen verhuur-plus (FUTD, Dec 2025): [futd.nl]