ECJ C-191/21 (Ministère de l’Économie, des Finances and de la Relance) – Order – Deliveries of buildings and building land purchased with a view to resale excluded from the Margin Tax Scheme

On February 10, 2022, the ECJ issued its decision in the case C-191/21 (Ministère de l’Économie, des Finances and de la Relance).

Context: Reference for a preliminary ruling — Article 99 of the Rules of Procedure of the Court — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 392 — Margin taxation scheme — Scope — Deliveries of buildings and building land purchased with a view to resale – Taxable person not having had the right to deduct on the occasion of the acquisition of the buildings – Resale subject to VAT – Concept of “building land”

Article in the EU VAT Directive

Article 392 of the EU VAT Directive 2006/112/EC.

Article 392 (Margin tax regime)
Member States may provide that, in respect of the supply of buildings and building land purchased for the purpose of resale by a taxable person for whom the VAT on the purchase was not deductible, the taxable amount shall be the difference between the selling price and the purchase price.

Facts

Les Anges d’Eux, Echo 5 and Cletimmo, defendants in the main proceedings, operate as property dealers.
As part of this activity, Les Anges d’Eux and Cletimmo have acquired, from private individuals, built-up land consisting of plots each comprising a dwelling house with adjoining land and outbuildings, these operations falling outside the scope of application of the VAT Directive. Echo 5 carried out a similar operation, the only difference being that the property acquired by it included a dwelling house with courtyard and garden, outbuildings, a spring and wooded land.
Subsequently, the defendants in the main proceedings divided or redistributed the bare land adjoining the original buildings in order to sell these lots as building land, subjecting these operations to VAT according to the margin scheme provided for in Article 268 of the general tax code, transposing article 392 of the VAT directive into French law.
Following verifications, the tax authorities called into question the application of this system and issued VAT reminders based on the full sale price of the land sold for the period from ¹ January 2013 to December 31, 2014 for Les Anges d’Eux, for the periods from January 1 ^to December 31, 2014 and November 2015 for Echo 5, as well as from January 1 ^to December 31, 2014 for regarding Cletimmo.
By judgments of 6 November, 20 November and 11 December 2018, the Administrative Court of Lyon (France) upheld, almost in their entirety, the requests of the defendants in the main proceedings seeking to obtain full discharge of those reminders of VAT as well as corresponding default interest, to the detriment of the tax authorities.
The tax authorities appealed against those judgments to the referring court, arguing, first, that the implementation of the VAT scheme on the margin necessarily presupposes that the property resold has a legal qualification identical to that of the property acquired, the notion of “purchase-resale” of building land should be understood as excluding all transformation operations. On the other hand, the tax administration considers that the operation consisting of the sale as building land, after parcel division of land initially acquired as the base land of a built building, cannot benefit from this derogatory regime. , but must be subject to VAT on the total price of the sale.
The defendants in the main proceedings maintain that the sale of building land which did not give rise to the right to deduction at the time of its acquisition is eligible for the option of VAT on the margin, the fact that the physical characteristics and the legal classification of the property purchased have been modified before the sale being without effect.
The referring court considers that the outcome of the dispute in the main proceedings depends on the clarifications which the Court will provide to the interpretation of Article 392 of the VAT Directive.

Questions

Should Article 392 of the [VAT] Directive be interpreted as excluding the application of the margin tax regime to transactions involving the delivery of building land in the following two cases:

– when this land, acquired built, has become, between the time of its acquisition and that of its resale by the taxable person, building land;

– when these lands have been subject, between the time of their acquisition and that of their resale by the taxable person, to changes in their characteristics such as their division into lots?

AG Opinion

None

Decision

Article 392 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it excludes the application of the tax regime on margin to delivery operations of building land when this acquired built land has become, between the time of its acquisition and that of its resale by the taxable person, building land, but it does not exclude the application of this scheme to delivery operations of building land when these lands have been subject, between the time of their acquisition and that of their resale by the taxable person, to changes in their characteristics such as a division into lots.

Summary

Source