On November 7, the ECJ issued its decision in the case C-594/23 (Lomoco Development and Others).
Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Supply of land that has only the foundations of residential housing structures in place – Classification – Article 12 – Concepts of ‘building land’ and ‘building or parts of a building’ – Criterion of the ‘first occupation’ of a building
Summary
- Court Case Overview: The Court of Justice of the European Union (CJEU) reviewed a case referred by the Vestre Landsret (High Court of Western Denmark) regarding the classification of land with only foundations in place for VAT purposes.
- Key Legal Question: The main question was whether such land should be classified as ‘building land’ and thus subject to VAT, or as a ‘building’ or ‘parts of a building’ which may be exempt from VAT under certain conditions.
- Background: The dispute involved the Danish Ministry of Taxation and companies that sold plots with foundations in place. The companies argued these should be treated as buildings, thus exempt from VAT, while the tax authority considered them building land, subject to VAT.
- Court’s Interpretation: The CJEU ruled that land with only foundations does not constitute a ‘building’ or ‘parts of a building’. Therefore, such land is classified as ‘building land’ and is subject to VAT according to Article 12 of the VAT Directive.
- Significance: This judgment clarifies that foundations alone do not meet the criteria for a building under VAT rules, impacting how similar transactions are taxed across the EU.
Articles in the EU VAT Directive
Artciles 12(1)(a) and (2), 135(1)(j) of the EU VAT Directive 2006/112/EC
Article 12
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.
Article 135
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);
Questions
Is it compatible with Article 135(1)(j), and Article 12(1)(a) and (2), on the one hand, and with Article 135(1)(k), and Article 12(1)(b) and (3), on the other, of Directive 2006/112 (
1 ) for a Member State, in circumstances such as those in the main proceedings, to consider a supply of land on which, at the time of supply, a pre-cast foundation has been constructed
and on which a residential building is only subsequently constructed by other owners to be a sale of building land subject to VAT?
AG Opinion
None
Decision
Article 12 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
must be interpreted as meaning that a supply of land that, at the date of that supply, has only the foundations of residential housing structures in place, constitutes a supply of ‘building land’ within the meaning of that article.
Source
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