Input VAT on office rent denied in absence of a valid option for taxable letting

Summary

The Arnhem-Leeuwarden Court of Appeal has ruled that a company could not deduct EUR 3,780 of VAT relating to office rent for 2014. No written lease was available for that year, no request to opt for taxable letting had been submitted, and the landlord had not issued VAT invoices or reported VAT. [futd.nl]
Letting immovable property is generally VAT-exempt in the Netherlands unless a statutory exception applies or the landlord and tenant validly opt for VAT-taxed letting. Without a valid option, VAT purportedly connected with the rent does not become deductible merely because the tenant uses the premises for business purposes.
Businesses renting property from shareholders, group companies or other related parties should apply the same documentation and invoicing standards as for third-party arrangements. Written agreements, qualifying use, a properly documented VAT option, compliant invoices and consistent VAT reporting should all be in place before input VAT is deducted.

Article

The Arnhem-Leeuwarden Court of Appeal has upheld the denial of an input VAT deduction claimed in connection with the rental of office space. The decision concerned a company that had rented office accommodation at the rear of the home of its sole shareholder since 2009. For 2014, however, no written rental agreement was available and no request to opt for VAT-taxed letting had been submitted. [futd.nl]

The shareholder-landlord had also not issued invoices charging VAT and had not filed VAT returns. Following a tax audit, the Dutch tax authorities imposed an additional VAT assessment and refused the company’s deduction of EUR 3,780 relating to the rent. The Gelderland District Court agreed with that treatment, after which the company appealed. The Court of Appeal likewise found no basis for the deduction. [futd.nl]

Under the Dutch VAT rules, the letting of immovable property is generally exempt. In qualifying circumstances, a landlord and tenant may jointly opt to treat the letting as subject to VAT. This can allow the landlord to recover VAT on property-related expenditure, while a tenant engaged in activities carrying a right of deduction can normally recover the VAT charged on the rent.

That optional treatment is not automatic. The arrangement must satisfy the applicable substantive and documentary requirements. Businesses must therefore be able to demonstrate that the parties made a valid choice for taxable letting and that the tenant uses the premises to the extent required for activities giving rise to VAT recovery. The invoicing and VAT-return treatment should also be consistent with that choice.

The case is particularly relevant to rental arrangements involving shareholders, directors and related companies. Although such arrangements may be commercially genuine, they can attract scrutiny where the contractual documentation is incomplete or the parties’ VAT reporting does not reflect the treatment subsequently claimed. The absence of invoices charging VAT and the landlord’s failure to account for VAT were significant factual problems in this case. [futd.nl]

Businesses should review property files to confirm that a written lease exists, the option for taxable letting has been validly documented, the tenant’s qualifying use has been assessed and appropriate VAT invoices are issued. The landlord’s and tenant’s VAT returns should reflect the same treatment. Any reliance on an administrative approval or concession should be documented against its precise conditions rather than assumed to apply.

The decision, issued on 30 June 2026 under case numbers 24/1944 to 24/1946, is identified as ECLI:NL:GHARL:2026:4342. It reinforces that VAT recovery on rent depends on the legal VAT treatment of the letting and the supporting evidence, not simply on the fact that the premises are used as an office. [futd.nl], [taxence.nl]

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