In a number of recent cases, the National Tax Tribunal has assessed whether VAT should be charged on supplies of immovable property. Firstly, there have been cases concerning supplies of buildings and land where the buildings were in their “old age”. Secondly, there have also been cases concerning supplies of “foundation land” with foundations constructed before 1 January 2011, which was the cut-off date for the new rules on VAT on immovable property. These cases involved supplies of buildings and associated land where the buildings were in their “youth”. In both types of cases, the National Tax Tribunal disagreed with the tax authorities and ruled in favour of VAT exemption. Bachmann/Partners Advokatpartnerselskab is pursuing VAT and construction cases in the courts, which are expected to reach the European Court of Justice.
Before 1 January 2011, all transfers of immovable property were exempt from VAT. From 1 January 2011 onwards, the VAT exemption has not been unconditional, as the supply of (i) new buildings or new buildings and their land and (ii) building land have been subject to VAT.
In the specific case currently being heard by Bachmann/Partners Law Firm before the Western High Court, a company had in the mid-2000s purchased an area of land on which various types of year-round buildings could be constructed. The company arranged for the local plan for the area to be amended and developed the area. Agreements were also concluded with architects for the preparation of sketch proposals for the building.
Before 1 January 2011, the company had foundations built on a number of the plots. The company had to change its original intention to develop the area itself. The plots were therefore gradually sold to buyers who were responsible for building houses on the established foundations.
However, the sale of the plots with the established foundations did not proceed as quickly as desired.
In 2017, the company’s VAT liability was increased on the grounds that the company had made supplies of building plots for which it had not accounted for VAT. The National Tax Court changed its decision to the effect that the sale of building plots subject to VAT was not a sale of building plots.
The Ministry of Taxation brought the decision before the courts. The case has been referred to the Western High Court as a matter of principle and there are currently discussions between the parties as to whether the Western High Court should be asked to refer a preliminary question to the European Court of Justice on the interpretation of the underlying relevant provisions of the VAT Directive.
Bachmann/Partners Law Firm is representing the company before the Western High Court. It is still the view that this is not a case of supplies of building land subject to VAT, but rather supplies of VAT-exempt buildings with associated land, because the foundations were constructed before the cut-off date of 1 January 2011. The overall view is that the term “building” includes any foundation and that a foundation is such a foundation, which the National Tax Tribunal has now also established in several cases on the basis of the judgment of the European Court of Justice in the case concerning KPC.
If, in connection with construction projects, you have also had plinths challenged as actual buildings, you are welcome to contact us for further discussion, as we are happy to coordinate these VAT cases.
Bachmann/Partners Law Firm has extensive experience with cases concerning VAT on real estate and assists with the conduct of cases in this regard. Contact Christian Bachmann on tel. +45 30 30 45 21 / chb@bachmann-partners.dk, Diana Mønniche on tel. +45 20 71 78 62 / dme@bachmann-partners.dk or Peter Hansen on tel. +45 40 32 35 35 / pha@bachmann-partners.dk.