Roadtrip through ECJ Cases – Focus on ”Transfer of Going Concern” (Art.19 EU VAT Directive)

Article in EU VAT Directive 2006/112/EC

Article 19 (Taxable transaction – Transfer of Going Concern)
In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor.
Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article.

(Article 5(8) of the Sixth VAT Directive)

Conditions for a Transfer of Going Concern to exist based on ECJ Cases

Transfer of a Business or Part of a Business: The transaction must involve the transfer of an entire business or a part of it that is capable of independent economic activity. This includes both tangible and intangible assets necessary for the ongoing operation of the business.
Continuity of Business Operations: The purchaser must intend to carry on the same kind of business as the seller. This means that the business operations should continue without significant interruption, and the purchaser should effectively take over the business’s activities.
Transfer of Assets: All the essential assets must be transferred. This may include immovable property (e.g., buildings), movable assets (e.g., equipment, inventory), and other essential resources (e.g., licenses, contracts) that are necessary for running the business.
No Change in Nature of Business: The nature of the business must remain the same post-transfer. The buyer should continue the same business activities that were conducted by the seller.
Transfer Must Be for Consideration: The transfer should generally occur for a consideration (payment), although this is not always a strict requirement. The key aspect is that the transaction should not be merely a liquidation or sale of assets without the intention of continuing the business.
Tax Registration: In many jurisdictions, both the seller and buyer should be registered for VAT (or the relevant tax), and the buyer must provide evidence of their intention to continue the business.
Proper Documentation: Appropriate agreements and documentation must be in place to formalize the transfer. This includes a written contract specifying the assets being transferred and the intention to operate the business as a going concern.