ECJ C-239/22 (Belgian State and Promo 54) – Judgment – Condition of the first use of a building

On March 9, 2023, the ECJ has released the decision in the case C-239/22 (Belgian State and Promo 54).

Context: Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 12(1) and (2) — Supply of a building or part of a building and the land adjoining it, carried out prior to its first occupation – Absence of provisions of domestic law laying down the procedures for applying the criterion linked to first occupation – Article 135(1)(j) – Exemptions – Delivery, after conversion, of a building having been object of a first occupation before the transformation – National administrative doctrine assimilating buildings having undergone major transformations to new buildings

Articles in the EU VAT Directive

Articles 2, 9(1), 12, 14, 135(1)(j) of the EU VAT Directive 2006/112/EC

Article 12 (Taxable persons)
1. Member States may regard as a taxable person anyone who carries out, on an occasional basis, a transaction relating to the activities referred to in the second subparagraph of Article 9(1) and in particular one of the following transactions:
(a) the supply, before first occupation, of a building or parts of a building and of the land on which the building stands;
(b) the supply of building land.
2. For the purposes of paragraph 1(a), ‘building’ shall mean any structure fixed to or in the ground.
Member States may lay down the detailed rules for applying the criterion referred to in paragraph 1(a) to conversions of buildings and may determine what is meant by ‘the land on which a building stands’.
Member States may apply criteria other than that of first occupation, such as the period elapsing between the date of completion of the building and the date of first supply, or the period elapsing between the date of first occupation and the date of subsequent supply, provided that those periods do not exceed five years and two years respectively.
3. For the purposes of paragraph 1(b), ‘building land’ shall mean any unimproved or improved land defined as such by the Member States.

Article 135 (Exemption)
1. Member States shall exempt the following transactions:
(j) the supply of a building or parts thereof, and of the land on which it stands, other than the supply referred to in point (a) of Article 12(1);

Facts

The company Groupe Henova, currently Promo 54, has realized a construction project in collaboration with the company Immo 2020 in which an old school has been converted into apartments and offices. To this end, a cooperation agreement was concluded between the company Groupe Henova and the company Immo 2020 on 06-06-2008, in which the company Immo 2020, owner of the site and the old building, instructs the company Groupe Henova to prepare the construction files. and evaluate the progress of the construction work, coordinate the different companies, negotiate the commercial contracts, assist all subcontractors and ensure the sale of the real estate. For all buyers, a building contract is concluded between them and the company Groupe Henova, which undertakes to carry out the renovation work for an amount of EUR 259 533.52 including VAT, or EUR 231 738.50 for the renovation of the apartment excluding VAT of 6% and EUR 11 480.01 for the construction of the garage excluding VAT of 21%. The Belgian State considers that the transaction has been artificially split in order to obtain an undue tax advantage and that there is not a sale of a ruined site and a conversion to which the reduced rate of 6% applies, but a single transaction consisting in the supply of new apartments subject to a VAT rate of 21%.Consideration:The judgment under appeal states that ‘Belgium has not transposed the second subparagraph of Article 12(2) of Directive 2006/112/EC, which has no direct effect’. The judgment states that ‘according to the applicant, only the supply of new buildings, i.e. those which have not yet been put into use, is taxable for VAT’ and that ‘the concept of ‘new building after conversion’ applies only to Member States which have transposed Article 12(2) of Directive 2006/112/EC, which is not the case for Belgium’. The judgment finds that ‘such reasoning cannot be followed’, since ‘it follows from the very concept of ‘new’ buildings, as referred to in Article 44, § 3, 1°, a) of the VAT Code that an old building can be renewed and put into use for the first time, provided that it has undergone a sufficiently substantial conversion so that there is no need to transpose Article 12(2) of the Directive in this regard’, with the result that ‘ a building can regain this designation after the expiry of the period in which it is regarded as new by means of a major renovation”. Since it concerns the interpretation of Articles 12(1) and (2) and 135(1)(j) of the Directive, a question should be referred to the Court for a preliminary ruling. of the Directive is not necessary in this regard’, with the result that ‘a building, after the expiry of the period in which it is classified as new, may regain this designation by means of a major conversion’. Since it concerns the interpretation of Articles 12(1) and (2) and 135(1)(j) of the Directive, a question should be referred to the Court for a preliminary ruling. of the Directive is not necessary in this regard’, with the result that ‘a building, after the expiry of the period in which it is classified as new, may regain this designation by means of a major conversion’. Since it concerns the interpretation of Articles 12(1) and (2) and 135(1)(j) of the Directive, a question should be referred to the Court for a preliminary ruling.

Source ecer.minbuza.nl

Questions

Are Article 12(1) and (2) and Article 135(1)(j) of Council Directive 2006/112/EC of November 28, 2006 on the common system of value added tax to be interpreted as meaning that, where a Member State has not defined the procedure for applying the criterion of first use to the conversion of buildings, the supply following the conversion of building which, before the conversion, was first used, wuthin the meaning of Article 12(1)(a) of the third subparagraph of Article 12(2) of the Directive, is still exempt from value added tax?

AG Opinion

None

Decision

Article 135(1)(j) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Article 12(1) and 2, thereof,

should be interpreted as:

the exemption provided for by this first provision for the delivery of buildings or part of a building and the land adjoining it, other than those whose delivery is made before their first occupation, also applies to the delivery of a building having been the subject of a first occupation before its conversion, even if the Member State concerned has not defined, in national law, the procedures for applying the criterion of first occupation to the conversion of buildings, such as the second of these provisions authorized it to do so

Source