- The General Court held that where a business transfer is paired with a new VAT-exempt lease of the business property to the transferee, that lease is not itself part of the transfer of a totality of assets/TOGC under Articles 19 and 29 of the VAT Directive if the lease right did not already exist before the transfer.
- Because the property was then used for VAT-exempt leasing, the transferor had to adjust previously deducted input VAT on the building’s acquisition, construction, alteration, or improvement costs.
- The transferor could not shift that input VAT adjustment to the transferee merely by relying on the VAT Directive’s succession fiction for business transfers.
- The ruling is significant for situations where a business is transferred but the real estate is retained by the seller and leased to the buyer, especially in jurisdictions that do not allow VAT to be charged on commercial leases.
Source: assets.kpmg.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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