Judgment of 13 June 2018 in Case C‑421/17 (Polfarmex)
Facts:
Polfarmex, a limited company with its registered office in Kutno (Poland), carries out its economic activity in the area of manufacture of pharmaceutical products. As such, it is subject to VAT.
Polfarmex planned to restructure the company’s share capital through the buy-back of part of the shares held in that capital by a limited liability company, using one of the methods of ‘redemption’ provided for by the Polish Companies Code, that is to say, automatic, mandatory or voluntary redemption. The compensation due by reason of that redemption would be the transfer, in favour of that other company with limited liability, of ownership of some land and the buildings thereon and their equipment.
To that end, Polfarmex made an application to the Polish Minister for a tax ruling in order to determine whether the redemption of the shares held by the limited liability company, on the one hand, and the transfer of ownership of immovable property in favour of that company, on the other, would be subject to VAT.
Polfarmex argued that the transactions should not be subject to VAT, as they could not be regarded part of its economic activity. Furthermore, it argues that there is a single complex transaction comprising the redemption of shares and the payment made therefor and that there is a causal link between those two transactions, so that it is incorrect to treat them separately for tax purposes.
However, the Minister took the view that the transfer of immovable property in return for the redemption of shares must be regarded as a supply of goods, subject to VAT. There is a binding relationship, Polfarmex committing to transfer, to the limited company holding shares in its capital, ownership of immovable property and the shares redeemed constituting the consideration for that transfer. In other words, since there will be a supply of goods for consideration, the transaction must be subject to VAT.
Judgment:
The Court rules:
The transfer by a limited company to one of its shareholders of the ownership of immovable property, made as consideration for the buy-back, by that limited company, under a mechanism for the redemption of shares provided for in national legislation, of shares held in its share capital by that shareholder, constitutes a supply of goods for consideration subject to VAT provided that that immovable property is used in the economic activity of that limited company.
Source: Curia
