Compromise on the dispute between the purchaser and the refund of revision of VAT

Background and Context: The case involves a dairy farm partnership transition, where X, a new partnership, continues the operations of Partnership 2, which includes father A and his sons. A VAT-exempt supply of immovable property was made to A in 2016, and X was unable to deduct input VAT until the agricultural scheme was abolished on January 1, 2018.
Legal Proceedings: Initially, the District Court of Noord-Nederland ruled that X was not entitled to a VAT refund adjustment, as the right to deduct input tax had not changed since the first year of use. X appealed this decision to the Arnhem-Leeuwarden Court of Appeal.
Compromise Agreement: During the appeal hearing, the parties reached a compromise, resulting in an increase in the VAT refund for the period from January 1, 2018, to March 31, 2018, by €28,833, raising the total refund to €122,635, with an adjustment to the interest on the reimbursed tax accordingly.

Initial VAT Refund and Legal Proceedings: A dairy farm partnership initially received a VAT refund of €48,915, which increased to €93,802 after an objection. The partnership’s appeal to the District Court of Noord-Nederland was dismissed, although compensation for immaterial damage and legal costs was awarded due to delays.
Key Legal Questions: The dispute centered on whether the partnership, as a tax legal successor, was entitled to deduct €57,666 in input tax related to a previous owner’s VAT adjustment after the abolition of the agricultural scheme in January 2018. The Court rejected the partnership’s arguments for recovery based on tax neutrality and legitimate expectations.
Compromise Agreement: On June 11, 2025, a compromise was reached at the Arnhem-Leeuwarden Court of Appeal, increasing the VAT refund by €28,833 to a total of €122,635, with tax interest adjustments. The parties agreed to bear their own legal costs, and the Tax and Customs Administration would reimburse the partnership’s court fees. The Court upheld the appeal and set aside the District Court’s earlier judgment, maintaining the previous decisions regarding costs and damages.

Refund