Building Sale: No Transfer of a Going Concern Without Proof of Business Continuity

Summary

• The exemption for transfers of a going concern under Article 257 bis of the French Code général des impôts requires the transfer of an autonomous economic activity.
• The purchaser must have the intention to continue the transferred business activity.
• A rectifying deed referring to a “VAT universality” is insufficient in the absence of objective evidence of continued operation.

Article

The Administrative Court held that the sale of a rental property by SCI des Trinois did not qualify as a transfer of a going concern. Although the taxpayer relied on a subsequent rectifying deed referring to a “VAT universality” under Article 257 bis CGI, the Court found that this document alone did not demonstrate that the purchaser had actually continued the rental activity. In the absence of evidence of business continuity, the transaction was subject to VAT adjustment under the capital goods scheme with a 20-year adjustment period.

Sources

• Article 257 bis of the French Code général des impôts
• Council Directive 2006/112/EC, Article 19
• CJEU Case C-497/01
• PwC