- The compensated waiver of a right of first refusal may constitute a taxable supply of services. By agreeing not to exercise the right, the holder can provide an identifiable economic benefit to another party, creating a direct relationship between the undertaking to refrain from acting and the payment received.
- In the case considered, the right related to a building on third-party land and was connected with the holder’s business rental activity. That commercial link supported the treatment of the compensated waiver as a transaction carried out within the holder’s economic activity rather than a private disposal.
- Settlement agreements and transaction documents should determine the VAT treatment before payment. Parties should address whether the amount is VAT-inclusive or exclusive, the place and time of supply, invoicing obligations and the payer’s recovery position rather than relying on labels such as compensation or indemnity.
Source LeitnerLeitner, VAT Update July 2026, published 25 August 2026
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