VAT Deduction Adjustment Required for Exempt Leaseback After Business Transfer

• A&P Deco built and renovated a business building, deducted all VAT, then transferred its business in 2013 and on the same day leased the property back to the transferee under VAT-exempt rent.
• The Belgian tax authority said this exempt rental changed the building’s use from taxable to exempt activities, triggering a pro rata VAT adjustment on the original input VAT.
• The Court held that A&P Deco must indeed revise the deducted VAT, because the new lease is a new right and not part of the transfer of a universal business; therefore the rental stays with the transferor for VAT purposes.
• The transferee cannot be made liable for that adjustment, since that would tax someone involved in a transaction it did not participate in, contrary to neutrality and equal treatment.
• The Court distinguished this case from sale-and-lease-back and Faxworld, emphasizing that VAT recovery must match actual use of the property for taxable vs. exempt activities.

Source: btwjurisprudentie.nl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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