Comments on T-366/25 (Szytelbiecka): Divided business gift not a TOGC, requires single, complete transfer

Donation of an enterprise and VAT – CJEU indicates the limits of exemption from taxation

The CJEU ruled in Case T-366/25 Szytelbiecka that a donation of a business to two individuals, each receiving a 1/2 share, does not qualify for the VAT exemption for the transfer of an enterprise or part thereof, even if the recipients intend to subsequently contribute these shares to a partnership to continue the business.
The Court emphasized a narrow interpretation of Article 19 of the VAT Directive, stating that individual activities should be assessed based on their actual nature at the moment of transfer, not solely on the ultimate economic purpose or subsequent intentions.
This judgment highlights that for VAT exemption, it is crucial that the transferred assets at the time of the transaction constitute an enterprise or an organized part capable of independent economic activity, making careful planning of family business successions, especially those involving multiple successors, essential to avoid unexpected VAT liabilities.

Source MDDP

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The AG opined that a donation of an undertaking split 50/50 to two daughters, who then intend to incorporate it into their existing partnership, does not constitute a “transfer of a going concern” (TOGC) under Article 19 of the VAT Directive.
The key reasons given were that neither daughter individually received a totality of assets capable of independent economic activity, and they did not intend to continue the business individually as VAT-taxable successors.
The AG emphasized that each transfer must be analyzed separately, rejecting a broader “economic reality” approach that would treat the combined transactions as a single TOGC, citing concerns about timing, legal classification, and objective analysis.

Source KPMG