Roadtrip through ECJ Cases – Focus on ”Exemption – The ”leasing or letting of immovable property” (Art. 135(1)(l))

Defining “letting of immovable property”

C-284/03 (Temco Europe) – What constitutes “letting”

• Core definition. The Court set the classic test: letting of immovable property means the landlord assigns to the tenant, for an agreed period and against payment, the right to occupy the property as if the owner and to exclude any other person from enjoying that right.
• Passivity not decisive. A relatively passive activity linked to the passage of time, but the arrangement’s precise features matter more than the label in the contract. National courts must look at the real substance of complex occupation agreements, not merely their form.
• Application. The three related occupation agreements between associated companies could still qualify as “letting” despite variable, turnover-based fees and non-exclusive occupation, provided the essential characteristics were met. The referring court had to verify duration and the right to occupy and exclude others.

C-315/00 (Maierhofer) – Prefabricated demountable buildings

• Immovable despite being demountable. Letting of buildings assembled from prefabricated components fixed to or in the ground, so they cannot be easily dismantled or moved, constitutes exempt letting of immovable property, even where the structures must be removed at the end of the lease.
• Fixture test. What matters is that the buildings are firmly fixed to the ground; the fact that they could theoretically be taken apart and re-erected elsewhere does not deprive them of the character of immovable property for VAT purposes.
• Significance. The ruling clarified that “immovable property” is an autonomous EU concept turning on physical attachment to land, not on the permanence or construction technique, preventing Member States from taxing what is essentially an exempt real-estate letting.

C-532/11 (Leichenich) – Houseboat with berth and jetty

• Single immovable letting. Rental of a houseboat, including its permanently assigned mooring and landing stage, is exempt letting of immovable property where the boat is immobilised by fixings to the bank/riverbed that are not easily removed and stays in a demarcated, identifiable location.
• Delimited area. The berth and jetty form an integral, delimited part of the arrangement, giving the tenant exclusive use of a fixed portion of water and bank, satisfying the requirement that immovable property be a specifically identifiable area.
• Ancillary elements. The letting of the houseboat and the accompanying berth and jetty is a single, indivisible supply; the water-based elements are not separated out, and the whole transaction benefits from the immovable-property letting exemption.

Exclusions from the exemption (taxable lettings)

C-173/88 (Morten Henriksen) – Letting of garages

• Parking exclusion. Letting of premises and sites for parking vehicles is expressly excluded from the exemption and is therefore taxable, reflecting the Sixth Directive’s rule that vehicle-parking lettings do not enjoy the immovable-property exemption.
• Close-link exception. However, that exclusion cannot exclude from exemption a garage letting that is closely linked to an exempt letting of immovable property (e.g. a dwelling), where both form part of a single economic transaction between the same parties.
• Single-transaction test. Garages and parking spaces let together with exempt residential or commercial premises share the exempt treatment; the referring court must determine whether the two lettings genuinely constitute one composite supply rather than separate, independent contracts.

C-275/01 (Sinclair Collis) – Cigarette vending machines

• Not letting. Granting the owner of cigarette vending machines the right to install, operate and maintain them in a shop, in return for a share of profits, does not amount to letting of immovable property and is therefore not exempt.
• No exclusive occupation. The agreement did not transfer the right to occupy a defined area of the premises and exclude others; the space occupied by the machines was neither delimited nor the essential object of the contract, defeating the letting characterisation.
• Real object. The true purpose was the commercial exploitation of cigarette sales, not passive provision of space. The composite service (siting, security, maintenance, profit-sharing) went well beyond mere letting, so standard VAT applied to the arrangement.

C-451/06 (Walderdorff) – Fishing rights

• Fishing lease taxable. Granting a right to fish, by way of a ten-year lease and for consideration, does not constitute a letting or leasing of immovable property and cannot benefit from the exemption.
• No occupation of land. The right holder does not acquire the right to occupy a defined area of the lake or watercourse and to exclude all others as an owner would; the object is exploiting fish stocks, not occupying immovable property.
• Autonomous concept. Because “letting of immovable property” is a strictly interpreted EU derogation, an incorporeal right to take fish falls outside it, and the supply is subject to VAT at the standard rate.

C-150/99 (Stockholm Lindöpark) – Golf course access

• Active service. Running a golf course, granting members and visitors access in exchange for fees, is not passive letting of immovable property; it involves supervision, management, maintenance and provision of other facilities, so it cannot be exempt.
• No general exemption. Sweden could not maintain a blanket VAT exemption for making sports facilities available; such supplies are taxable, and the exemption for immovable-property letting must be interpreted narrowly and does not extend to sport-facility use.
• State liability. The Court confirmed the exemption breached the directive and that the incorrectly-taxed operator could rely on the directive’s directly effective provisions, opening the door to Francovich-type State liability for the wrongful national exemption.

C-55/14 (Régie communale – Stade Luc Varenne) – Football stadium

• Bundle beyond letting. Making a football stadium available for a fee, combined with services of managing, supervising, maintaining and cleaning the pitch and granting access rights (up to 80% of the fee), is not exempt letting of immovable property.
• Services dominate. Because the operator retained control and provided a substantial package of services rather than merely handing over passive occupation of the ground, the arrangement lacked the essential characteristic of letting and was taxable.
• Fact assessment. The national court must weigh the relative importance of the mere provision of the pitch against the accompanying services; where the services predominate, the composite supply falls outside the narrowly construed immovable-property exemption.

C-428/02 (Fonden Marselisborg Lystbådehavn) – Boat moorings

• Berths are immovable letting. Letting of water-based berths for mooring boats, and of land sites for storing boats onshore, constitutes letting of immovable property, since a delimited, identifiable part of the harbour and land is placed at the user’s exclusive disposal.
• Vehicle exclusion applies. Boats used for mooring qualify as “vehicles”; therefore the letting of moorings falls within the exclusion for parking of vehicles and is taxable, not exempt, aligning water berths with car-parking treatment.
• Consistent outcome. Both the in-water berths and the winter land-storage sites are taxable, ensuring boat-parking is treated like other vehicle parking and preventing an artificial distinction between water and land elements of the same harbour service.

C-598/20 (AS Pilsētas zemes dienests) – Compulsory land lease (Order)

• Statutory lease taxable. Where a building owner is not the owner of the underlying land and a compulsory (statutory) lease of that land arises by operation of law, the letting of the land is not exempt and is subject to VAT.
• No agreement of wills. Although imposed by law rather than freely negotiated, the arrangement still amounts to a supply of services for consideration; but the Court confirmed it does not qualify for the immovable-property letting exemption in these circumstances.
• Order format. Decided by reasoned order, the ruling reinforced that exemptions are strictly construed and that a compulsory lease of land beneath third-party buildings must be taxed, clarifying treatment of Latvia’s split-ownership land regime.

Assignments, surrenders and related transactions

C-63/92 (Lubbock Fine) – Surrender of a lease

• Surrender covered. The concept of “letting of immovable property” covers the situation where a tenant surrenders its lease back to the landlord, giving up possession in return for consideration; such surrender therefore benefits from the same exemption as the original letting.
• Symmetry principle. A transaction that alters or terminates a contractual relationship that itself falls within the exemption cannot be treated differently; the surrender is the mirror image of the exempt grant and shares its VAT treatment.
• Member-State limits. While States may set conditions and exclusions to the letting exemption, they cannot exempt the grant of a lease yet tax its surrender absent a specific excluded category, as that would be inconsistent.

C-108/99 (Cantor Fitzgerald International) – Accepting an assignment for payment

• Assignment acceptance taxable. Where a prospective tenant accepts the assignment of a lease from the outgoing tenant in return for a payment made by that outgoing tenant, the service supplied (taking over the lease) is not exempt letting of immovable property.
• Distinguished from Lubbock Fine. Unlike a surrender back to the landlord, this transaction is between two tenants and does not itself transfer occupation from a landlord; it is a distinct taxable service of relieving the outgoing tenant.
• Strict construction. The Court reaffirmed that exemptions are to be interpreted narrowly, so an inducement payment for stepping into a lease cannot be shoehorned into the immovable-property letting exemption and is subject to VAT.

C-270/09 (MacDonald Resorts) – Timeshare “points” rights

• Points sales taxable. Selling contractual “points” rights that members can later convert into temporary use of holiday accommodation is not, at the moment of sale, exempt letting; the true supply crystallises when points are exchanged for actual accommodation.
• Place of supply. The relevant service is connected with the immovable property, so the place of taxation is where the specific accommodation is situated when the customer converts the points into a right to occupy, not where points are sold.
• Substance over form. The Court looked past the intermediate “points” mechanism to the real economic purpose, taxing the arrangement according to the underlying holiday-accommodation supply and preventing avoidance through multi-stage timeshare structures.

C-278/18 (Sequeira Mesquita) – Transfer of vineyard exploitation

• Agricultural letting exempt. A contract granting a company, for consideration and a set period, the right to farm and exploit vineyards agriculturally, with exclusive use of the land, constitutes exempt letting of immovable property within the meaning of the exemption.
• Occupation and exclusivity. Because the operator obtained exclusive occupation of specific, identifiable agricultural land and could exclude others for the agreed term, the essential characteristics of “letting” were satisfied notwithstanding the agricultural nature of the activity.
• Clarified scope. The ruling confirms that agricultural exploitation rights over land can fall within the immovable-property letting exemption, distinguishing genuine land occupation from mere rights to exploit incorporeal resources such as fishing (Walderdorff).

C-17/18 (Mailat – Apcom Select) – Restaurant lease with equipment; TOGC

• Single letting supply. Leasing immovable property (a restaurant) together with the movable fixed assets and consumables needed to operate it constitutes a single supply, in which the letting of the immovable property is the principal, exempt element.
• Not a TOGC. Merely letting the premises and equipment, without transferring ownership of a business capable of independent operation, does not amount to a transfer of a totality of assets (going concern) under Articles 19/29 of the VAT Directive.
• Ancillary equipment. The lease of equipment and consumables is ancillary to, and follows the tax treatment of, the immovable-property letting; the whole composite transaction is therefore exempt rather than taxed as separate supplies.

Private use and self-supply

C-269/00 (Seeling) – Private use of business building

• Full allocation allowed. A taxable person who allocates an entire mixed-use building to the business may deduct all input VAT, and the private use of part of it as a dwelling is treated as a taxable supply of services (deemed self-supply).
• Not exempt letting. That private use cannot be equated with exempt letting of immovable property, because there is no letting to a third party, no rent, and none of the essential characteristics of a lease relationship.
• Deduction preserved. Consequently the private use is taxed, but the taxpayer retains full initial input-VAT deduction on the whole building, spreading the private-use output tax over time rather than restricting deduction upfront.

C-436/10 (BLM) – Private use of company building by manager

• No exempt letting. Where a company allocates a building wholly to its business but lets part be used as a private residence by a manager without genuine rent, this private use is not exempt letting of immovable property.
• Deemed supply rules. The situation is governed by the self-supply / private-use provisions rather than the letting exemption, so the treatment turns on whether input VAT on the building had been fully deducted.
• Follows Seeling/Medicom line. The Court aligned BLM with its earlier reasoning: absent a real lease with agreed rent and exclusive occupation, gratuitous private use by company officers cannot attract the immovable-property letting exemption.

C-210/11 & C-211/11 (Medicom and Maison Patrice Alard) – Free residential use by managers

• No rent, no letting. Making part of a company’s business premises available to its managers (or their families) as a residence free of charge does not constitute exempt letting of immovable property, because a rent payment is an essential precondition.
• Deduction consequences. Since there is no exempt letting, the arrangement is dealt with under the private-use rules; the availability of input-VAT deduction on the building depends on the property’s business allocation and the deemed self-supply of that private use.
• Rent essential. The judgments underline that payment of rent is indispensable to the “letting” concept; gratuitous provision of housing to directors cannot be recharacterised as exempt letting to restrict the company’s deduction rights.

Rights in rem, concessions and specific supplies

C-326/99 (“Goed Wonen”) – Rights in rem as property/letting

• Options for States. A Member State may treat the creation, transfer or surrender of certain rights in rem over immovable property (such as usufruct) as a supply of goods, and may also classify the grant of such rights as exempt letting/leasing.
• Anti-avoidance aim. The rules upheld a Dutch anti-avoidance measure aimed at schemes using usufruct constructions to obtain undue input-VAT deductions on immovable property, confirming States’ latitude to characterise rights in rem accordingly.
• Equivalence principle. Treating a usufruct like letting is legitimate where, for its agreed duration and against payment, it confers the right to occupy and use immovable property as if owner, mirroring the essential features of a lease.

C-174/06 (CO.GE.P) – Maritime state-property concession

• Concession as letting. A concession granting, for consideration and a period, the exclusive right to use areas of maritime public (state) property — here for storing petroleum products — constitutes exempt letting of immovable property within the meaning of the exemption.
• Exclusive use decisive. Although styled as a public-law concession, its substance was that of a lease: the holder obtained exclusive occupation of a delimited part of the maritime domain and could exclude others, satisfying the letting definition.
• Form irrelevant. The Court confirmed that the public-law or administrative label of the arrangement does not prevent it from qualifying as exempt letting where the economic and legal characteristics of a lease are present.

Equipment, utilities and services

C-516/21 (Finanzamt X) – Leasing of building with permanently installed equipment

• Ancillary exclusion disapplied. The exclusion from exemption for letting of “permanently installed equipment and machinery” does not apply where that letting is merely ancillary to a principal, exempt letting of a building, forming with it a single economic supply.
• Single-supply principle. Where the equipment (here, industrial turkey-rearing installations) and the building are let under one contract as an indivisible whole, the ancillary equipment follows the exempt treatment of the principal building letting.
• Clarified interplay. The ruling reconciles the equipment-letting carve-out with the single-supply doctrine: the carve-out targets stand-alone equipment lettings, not equipment that is inseparably part of an exempt real-estate letting.

C-449/19 (WEG Tevesstraße) – Heat supply by owners’ association

• Heat is taxable. The supply of heat by an association of property owners (WEG) to those owners is a supply of goods subject to VAT and does not fall within the exemption for letting of immovable property.
• National exemption incompatible. A German rule exempting such heat supplies conflicted with the VAT Directive; because heating is a distinct, consumption-based supply, it cannot be absorbed into any exempt letting relationship among the co-owners.
• Deduction access. Treating the heat supply as taxable allows the association to deduct input VAT on the heating installation and fuel, aligning treatment with the neutrality principle for genuine supplies of goods.

Real-estate connection / place of supply

C-215/19 (Veronsaajien oikeudenvalvontayksikkö – A Oy) – Colocation/data-centre services

• Not letting. Data-centre colocation services — housing customers’ servers in racks and providing electricity, cooling, monitoring and security — do not constitute letting of immovable property, because customers have no exclusive right to occupy or control a defined part of the property.
• Not “connected with immovable property.” For place-of-supply purposes, the services are not sufficiently linked to specific immovable property; the property is merely the setting, and the racks are not centrally and essentially the object of the supply.
• General rule applies. Consequently, colocation is a composite service taxed under the general B2B place-of-supply rule (where the customer is established), not where the data centre is located, and cannot benefit from the letting exemption.