In a new decision, the National Tax Tribunal has ruled that real estate can be sold free of VAT, even though it was a condition of the purchase agreement that a sister company was to be responsible for the demolition and new construction of properties on the sold share of the property. The fact that the companies were affiliated did not change the fact that the sale of the property and the provision of the construction work had to be qualified independently.
In the case in question, a private limited company had sold part of a property to a housing company free of VAT. At the conclusion of the purchase agreement, it was conditional that a sister company would be responsible for the demolition and new construction of properties on the sold part of the property.
SKAT considered the transaction to be subject to VAT, as the share of the sold property with buildings was, in SKAT’s opinion, to be regarded as a sale of building land with a project.
The National Tax Tribunal concluded that the company’s transfer of the property was exempt from VAT, as at the time of the transfer of the property it was a developed real estate and the development did not constitute new buildings.
The National Tax Court noted that the sale of the property and the supply of the construction work had to be characterised separately, as the transactions were not carried out by the same taxable person. The fact that the companies were affiliated and that there was a temporal and substantive connection between the conditional purchase agreement and the conditional construction contract did not change this.
The National Tax Court’s decision can be read in full here
In our opinion, the above decision from the National Tax Court has significance for many already completed transactions as well as future property projects.
With the decision of the National Tax Tribunal, it can be established that it is of no importance for the VAT assessment of the sale of real estate if the seller of the real estate at the same time, via a group company, enters into a construction contract that will handle the demolition task and construct new buildings.
The decisive factor for the VAT treatment is that it is not the same legal entity with which the construction contract is concluded.
Bachmann/Partners Advokatpartnerselskab has extensive experience with VAT in connection with real estate.
It is essential when transferring real estate consisting of built-up areas with old and demolished buildings that a review is carried out before a transfer takes place. Bachmann/Partners Advokatpartnerselskab assists in assessing how the further course of a property transfer should be handled in terms of VAT.
For already completed property projects subject to VAT, the above decision from the National Tax Tribunal may make it possible to resume the VAT treatment of the case. Bachmann/Partners Law Firm is happy to assist in assessing whether there will be a possibility of a reopening.
This case concerned a property transfer that took place on 21 February 2014, which is why it will be possible to resume property transactions as far back as February 2014.
For further information, please contact Diana Mønniche on tel. 20717862 / email@example.com or Peter Hansen on tel. 40 32 35 35 35 / firstname.lastname@example.org.