General Court T‑366/25 (Szytelbiecka) – Judgment – Donation of an undertaking in two equal half‑shares is not a transfer of a totality of assets under Article 19 of the VAT Directive

Summary

• After receiving the respective shares, the daughters intended to transfer them immediately to a general partnership that they jointly owned and through which the business activities would continue. The Polish tax authority argued that the transaction did not constitute a VAT-exempt transfer of an undertaking because neither daughter would individually receive an independently operating business.
• The General Court confirmed that, for Article 19 to apply, the assets transferred must constitute a business or a part of a business capable of carrying on an independent economic activity, and the transferee must intend to continue that activity rather than merely liquidate it.
• The Court held that the transfers to the daughters had to be examined as separate and independent transactions. Since each daughter received only a half share of the undertaking and could not independently operate the business on the basis of that share alone, the transferred assets did not constitute an autonomous economic unit.
• Consequently, the Court ruled that the donation of an undertaking to two individuals in equal shares, followed by their intended contribution of those shares to a partnership, does not qualify as a transfer of a totality of assets or part thereof under Article 19 of Directive 2006/112. The subsequent intention to contribute the shares to a partnership was irrelevant because the condition of an independently transferable business was not satisfied at the time of the donation.

Context

Reference for a preliminary ruling under Article 267 TFEU – Taxation – Common system of VAT – Transfer of a totality of assets or part thereof – Article 19 of Council Directive 2006/112/EC, read with Article 2(1)(a) and the second subparagraph of Article 1(2) thereof – Donation of an undertaking in two equal shares to two individuals – Subsequent transfer of those shares to a general partnership owned by the individuals who were the beneficiaries of the donation – Polish implementing legislation, namely Article 6(1) of the ustawa o podatku od towarów i usług of 11 March 2004 (excluding from the scope of the Law transactions involving the disposal of an undertaking or an organised part thereof) and Article 2(27e) of that Law (definition of an “organised part of an undertaking”), read in conjunction with Article 55 of the Polish Civil Code – Dispute between D.B. and the Dyrektor Krajowej Informacji Skarbowej concerning a tax ruling of 26 June 2020 denying the application of the Article 19 no‑supply regime to a planned donation of undertaking “Przedsiębiorstwo B.” in half shares to the donor’s two daughters, who intend to contribute those shares to a general partnership (P.) which they own and which will continue the business in substantially unchanged form. No provision of the Charter or of the TFEU other than Article 267 TFEU was at stake.

Questions Referred

A single question was referred:

1. Must Article 19 of Directive 2006/112/EC be interpreted as meaning that a transfer of a totality of assets within the meaning of that provision also occurs when there is a transfer without consideration by a taxable person of a half share each of a totality of assets to two individuals who are not taxable persons and who intend to contribute those shares immediately as a contribution in kind to a business partnership of which they are partners?

AG Opinion

An Opinion was delivered at the sitting on 13 May 2026 by Advocate General J. Martín y Pérez de Nanclares. The full text of the Opinion is not contained in the source provided; only point 65 is reproduced in the judgment, where the Advocate General took the view that, the transactions being distinct and independent of one another, the condition relating to the capacity to carry on undertaking B.’s economic activity independently must be assessed separately in respect of each of D.B.’s daughters. The AG’s formal proposed answer to the question referred cannot be stated on the basis of the source.

Decision / Order of the Court

The ruling is a Judgment (not a reasoned Order). The request for a preliminary ruling was first declared admissible, the Court rejecting the European Commission’s implicit suggestion that the question was hypothetical.

On the substance, the Court ruled that the first paragraph of Article 19 of Directive 2006/112/EC must be interpreted as meaning that the transfer, without consideration, of an undertaking to two natural persons, each receiving a half share, who intend to make an immediate contribution in kind of those shares to a company carrying on an economic activity of which they are partners, does not constitute a transfer of a totality of assets or part thereof within the meaning of that provision. Accordingly, EU law does not preclude a Member State which has exercised the Article 19 option from treating such a donation as falling outside the no‑supply regime; the transaction is not excluded from the scope of the tax on that basis.

Argumentation

(Admissibility / presumption of relevance) – Questions on the interpretation of EU law referred in the factual and legislative context defined by the national court enjoy a presumption of relevance; the EU Courts may decline to rule only where the interpretation sought manifestly bears no relation to the main action, where the problem is hypothetical, or where the factual or legal material is insufficient. Since a finding that Article 19 does not apply would mean the transfer is not an exempt transaction, the question was not manifestly hypothetical.

(Effect of the Article 19 option) – Where a Member State has exercised the option in the first paragraph of Article 19, the transfer of a totality of assets or part thereof is not regarded as a supply of goods and is therefore not subject to VAT under Article 2 of the VAT Directive. This operates against the background of the fundamental principle that VAT applies to each transaction of production or distribution, after deduction of input VAT.

(Single transaction or distinct transactions) – Under the second subparagraph of Article 1(2) of the VAT Directive, each transaction must normally be regarded as distinct and independent. Formally distinct transactions form a single supply only where they are so closely linked that they constitute, objectively, a single indivisible economic supply which it would be artificial to split. That assessment falls to the national court, on an overall assessment of the qualitative rather than merely quantitative importance of the components, the EU Courts supplying the interpretative elements.

(Application to the facts) – Each daughter receives a half share of which she is sole owner and which she may dispose of without the other’s consent; each is individually free to carry out, or not, the subsequent transfer to the general partnership; that second transaction is not conditional on the first, is independent of it and occurs at a later date. Subject to verification by the referring court, the transactions are therefore not so closely linked as to form a single indivisible economic transaction and must each be regarded as separate and independent.

(Purpose of Article 19) – The provision aims to facilitate transfers of undertakings by simplifying them and by preventing the transferee’s cash resources from being overburdened by a disproportionate tax charge which would in any event ultimately be recovered through input VAT deduction.

(Two cumulative conditions) – The concept of “transfer of a totality of assets or part thereof” covers the transfer of a business or an independent part of an undertaking, including tangible and, as the case may be, intangible elements, where (i) those elements together constitute an undertaking or part of an undertaking capable of carrying on an independent economic activity, and (ii) the transferee intends to operate the business transferred and not merely to liquidate the activity immediately.

(Assessment per transferee – first condition not met) – Because the transactions are distinct and independent, the capacity to carry on undertaking B.’s activity independently must be examined separately in respect of each daughter. A half share does not constitute an autonomous unit of the undertaking’s assets enabling either daughter separately to carry on an independent economic activity; the first condition is therefore not satisfied, irrespective of their intention to contribute the shares to the partnership.

(No need to examine the second condition) – The two conditions being cumulative, failure of the “independent economic activity” condition rules out the application of Article 19, so the condition relating to the transferee’s intention to operate the business need not be examined.

Source

• Curia

References to Other ECJ Case Law

• C‑81/24, Jenec (EU:C:2026:470, para. 27) – presumption of relevance attaching to preliminary questions and the limited grounds for refusing to rule.
• C‑651/11, X (EU:C:2013:346, paras 29, 32, 45) – fundamental principle that VAT applies to each transaction after deduction of input VAT; effect of exercising the Article 19 option (no supply of goods); the two cumulative conditions defining a “transfer of a totality of assets or part thereof”.
• C‑427/23, Határ Diszkont (EU:C:2025:596, paras 37, 38, 39) – each transaction is normally distinct and independent; criteria for finding a single indivisible economic supply.
• C‑349/96, CPP (EU:C:1999:93, para. 29) – principle that each supply must normally be regarded as distinct and independent.
• C‑432/15, Baštová (EU:C:2016:855, paras 69, 70) – several formally distinct transactions may constitute a single transaction where it would be artificial to split them.
• C‑41/04, Levob Verzekeringen and OV Bank (EU:C:2005:649, para. 23) – it is for the national court to carry out the overall assessment, with the EU Courts providing the interpretative elements.
• C‑224/11, BGŻ Leasing (EU:C:2013:15, para. 33) – same principle on the division of tasks in assessing single/multiple supplies.
• C‑17/18, Mailat (EU:C:2018:1038, paras 13, 15) – purpose of Article 19 (facilitating transfers of undertakings, avoiding overburdening the transferee’s cash flow); requirement that the elements transferred together suffice to allow an independent economic activity to be carried on.